How Bad Credit Affects Your Car Insurance Rate (2026)

Drivers with bad credit (a FICO score below 579) pay an average of 118% more for full coverage than drivers with excellent credit (800+), and the gap can run even wider between the lowest and highest tiers specifically. Four states ban the practice entirely. For the full profile breakdown, see our car insurance by driver profile pillar guide.

The credit-tier cost gap

That works out to roughly a 273% price increase between the lowest and highest credit tiers measured — larger than the gap caused by most other individual rating factors, including age in some comparisons.

Why insurers use credit-based scoring at all

Credit-based insurance scores are built differently from a standard FICO score, but insurers report they correlate with claims frequency in actuarial studies — which is the legal justification for using them in the 46 states that permit it. In those states, credit-based insurance scoring is typically the second most influential rating factor after your driving record itself, which is why it can meaningfully affect your rate even with a perfectly clean driving history.

States that ban credit scoring

California, Hawaii, Massachusetts, and Michigan ban insurers from using credit scores to set car insurance rates entirely. Michigan additionally limits any credit-related scoring to payment plan options rather than premium or eligibility decisions, and Maryland allows credit history to factor into initial policy rates only, not renewals. If you live in one of the four ban states, your credit tier should have no effect on your quote — worth double-checking if you ever see an unexplained rate difference between quotes from different states.

Insurers that penalize bad credit differently

Not every carrier weighs credit the same way. Published comparisons have shown State Farm penalizing bad credit the most among major carriers — charging as much as 417% more for a poor-credit driver versus a good-credit driver — while other carriers (including Allstate specifically, versus State Farm) price the bad-credit tier more moderately. If your credit is a known factor working against you, it's worth shopping multiple carriers rather than assuming the penalty is uniform across the market.

How to actually improve this over time

Because credit-based insurance scores draw on similar underlying data to a standard credit score, the standard credit-repair playbook applies: pay down revolving balances, dispute reporting errors, and avoid new hard inquiries before shopping for insurance. Improvement here is gradual — expect months, not days — but re-shopping your policy every 6-12 months means you capture rate improvements as your credit profile improves, rather than staying on an old quote priced against your worse credit tier.

Frequently asked questions

How much more does bad credit cost on car insurance?+

Drivers with bad credit (below 579) pay an average of 118% more for full coverage than drivers with excellent credit (800+). Comparing the very lowest tier to the very highest tier specifically, the gap has been reported as high as 273%.

Which states ban credit-based car insurance scoring?+

California, Hawaii, Massachusetts, and Michigan ban the practice entirely. Michigan and Maryland impose partial restrictions rather than a full ban. The remaining 46 states allow credit-based insurance scoring as a rating factor.

Does every insurance company penalize bad credit the same amount?+

No. Published comparisons show meaningful differences between carriers — State Farm has been reported to charge as much as 417% more for poor credit versus good credit, a larger penalty than some competitors apply for the same credit gap.

Can I lower my car insurance by improving my credit?+

Yes, over time. Because credit-based insurance scores draw on similar data to a standard credit score, paying down balances and correcting reporting errors can gradually improve your insurance pricing tier — re-shop your policy periodically to capture the improvement.