Best Car Insurance for Bad Credit in 2025: How to Find Affordable Coverage

Finding affordable car insurance can be challenging, but it becomes even more difficult if you have bad credit. In 2025, many insurance providers still consider your credit score when calculating premiums. Drivers with lower credit scores often face higher rates—sometimes hundreds of dollars more per year than those with excellent credit.

But here’s the good news: while bad credit can raise your insurance costs, it doesn’t mean you can’t find affordable, reliable coverage. By comparing providers, understanding how credit affects rates, and using proven strategies, you can save money while still getting the protection you need.

Why Does Bad Credit Affect Car Insurance Rates?

Insurance companies use something called a credit-based insurance score to help predict how likely a customer is to file claims. Multiple studies have shown that drivers with lower credit scores tend to file more claims and incur higher costs for insurers.

That’s why insurers often charge higher premiums for those with bad credit. However, not all states allow this practice. For example, California, Hawaii, Massachusetts, and Michigan restrict or ban insurers from using credit scores when determining rates.

Factors Insurers Consider in a Credit-Based Insurance Score:

• Payment history (late payments, defaults)

• Amount of debt owed

• Length of credit history

• Types of credit used

• Recent credit inquiries

👉 Important: Your insurance score is not the same as your FICO score, but they are closely related.

How Much Does Bad Credit Increase Car Insurance Costs?

According to recent studies, drivers with bad credit pay 50–90% more for car insurance compared to those with good or excellent credit.

Here’s a quick comparison of average annual premiums in 2025:

👉 As you can see, bad credit can nearly double your insurance bill. That’s why choosing the right insurer is crucial.

Best Car Insurance Companies for Bad Credit in 2025

Even if you have poor credit, some insurers are more forgiving and offer better rates than others. Below are some of the top companies in 2025 that provide affordable car insurance for drivers with bad credit.

1. GEICO

• Why it’s great: Known for affordable rates and nationwide availability.

• Pros:

  • Lower average premiums for drivers with bad credit compared to many competitors

  • Wide range of discounts (safe driver, multi-policy, military, etc.)

  • Strong customer service ratings

• Cons: May not offer as many local agents for personalized service

2. State Farm

• Why it’s great: Offers flexible payment plans and strong agent network.

• Pros:

  • Discounts for bundling home and auto insurance

  • Strong financial stability

  • Good claims satisfaction ratings

• Cons: Rates may still be slightly higher for very low credit scores

3. Progressive

• Why it’s great: Popular with drivers who want flexible coverage and usage-based insurance.

• Pros:

  • Snapshot program rewards safe drivers

  • Many discounts (multi-car, continuous insurance, homeowner, etc.)

  • Easy online quotes and policy management

• Cons: Rates can vary widely by state

4. Nationwide

• Why it’s great: Offers competitive premiums and good customer service.

• Pros:

  • Vanishing Deductible program (your deductible shrinks with safe driving)

  • Flexible payment options

  • Good range of add-on coverage

• Cons: Not available in every state

5. Allstate

• Why it’s great: Best for drivers who want personalized support from local agents.

• Pros:

  • Accident forgiveness available

  • Lots of discounts (new car, good student, anti-theft device, etc.)

  • Nationwide presence with local support

• Cons: Generally higher premiums compared to GEICO or Progressive

6. USAA (For Military Members & Families)

• Why it’s great: Offers some of the lowest rates in the industry.

• Pros:

  • Excellent customer service

  • Competitive pricing, even for those with bad credit

  • Wide range of financial products

• Cons: Only available to military members, veterans, and their families

Quick Comparison Table: Best Insurers for Bad Credit in 2025

How to Lower Car Insurance Costs with Bad Credit

Having bad credit doesn’t mean you’re stuck with high rates. Here are proven ways to reduce your premiums:

1. Shop Around and Compare Quotes

Never settle for the first quote. Different insurers weigh credit scores differently.

2. Bundle Policies

Combine your auto and home (or renters) insurance for a discount.

3. Enroll in Usage-Based Programs

Programs like Progressive’s Snapshot or State Farm’s Drive Safe & Save reward good driving behavior.

4. Increase Your Deductible

A higher deductible means lower monthly premiums—but only do this if you can afford the out-of-pocket expense.

5. Maintain Continuous Coverage

Gaps in insurance coverage raise red flags for insurers and increase rates.

6. Look for Discounts

Common discounts include:

• Good student discount

• Anti-theft device discount

• Multi-car discount

• Defensive driving course discount

7. Work on Improving Credit Over Time

Long-term, the best way to lower insurance costs is to improve your credit score. Pay bills on time, reduce debt, and monitor your credit report.

Common Mistakes to Avoid

1. Not Comparing Enough Quotes – This is the #1 reason drivers overpay.

2. Choosing Only the Cheapest Policy – You need adequate coverage, not just low price.

3. Ignoring Discounts – Many drivers miss out on savings by not asking.

4. Letting Coverage Lapse – An insurance gap will spike your future rates.

5. Not Considering Usage-Based Insurance – If you’re a safe driver, this could save hundreds.

FAQs About Bad Credit and Car Insurance

1. Can I be denied car insurance because of bad credit?
In most states, no. Insurers may charge higher premiums, but they cannot outright deny you coverage based on credit alone.

2. Which states don’t allow credit scores to impact car insurance?
California, Hawaii, Massachusetts, and Michigan restrict or prohibit the use of credit scores.

3. Will improving my credit score really lower my insurance rates?
Yes. Even moving from “poor” to “fair” credit can save you hundreds per year.

4. Is there a minimum credit score required for car insurance?
No, but lower scores usually mean higher rates.

5. Should I get full coverage with bad credit?
It depends on the value of your car. If you drive a newer car or have a loan, full coverage is recommended.

Conclusion

Having bad credit in 2025 can make car insurance more expensive, but it doesn’t mean you’re out of options. Companies like GEICO, State Farm, Progressive, Nationwide, Allstate, and USAA (for military families) provide better rates for drivers with poor credit.

By comparing quotes, using discounts, and working to improve your credit score, you can still find affordable and reliable coverage. Don’t let bad credit stop you from protecting yourself and your vehicle on the road.

✅ Final Tip: Always review your insurance every 6–12 months. Rates change, and the insurer that was most affordable last year may not be the best option this year.