A driver with poor credit and a spotless driving record can pay more for car insurance than a driver with a recent DUI and excellent credit. That is not a typo — across most of the United States, insurers weigh a credit-based insurance score almost as heavily as a driving record when setting a price.
⭐Drivers with poor credit typically pay 40% to more than 100% more for car insurance than drivers with excellent credit, depending on the insurer and state, according to multiple 2026 industry rate studies.⭐
A low FICO score does not have to mean the priciest quote available. Four states ban the practice outright, and the gap between insurers is often larger than the gap between credit tiers.
This guide covers what a low FICO score actually does to a car insurance bill, which insurers price credit risk most gently in 2026, which states restrict the practice, and where to turn if a standard insurer won't offer coverage at all — closing with a comparison to the United Kingdom, Canada, and Australia, where a driver's bank balance plays a far smaller role in what they pay to get behind the wheel.
What Is a Credit-Based Insurance Score, and How Is It Different From a FICO Score?
A FICO score predicts how likely someone is to repay a loan. A credit-based insurance score predicts something else: how likely a driver is to file a claim. Both draw on similar credit report data — payment history, outstanding debt, account age — but each is calibrated differently, so the two scores are rarely identical. Insurers are not required to disclose the exact insurance score they calculate, and no consumer site lets a driver look it up the way they can pull a FICO score.
An earlier Federal Trade Commission (FTC) report to Congress concluded that credit-based insurance scores are, in fact, effective predictors of claims risk, which helps explain why the practice has persisted despite ongoing criticism. Roughly 95% of US auto insurers use some form of credit-based scoring where it is permitted, according to a FICO estimate reported in 2026. One reassuring detail: requesting a quote only triggers a soft credit inquiry, which never lowers a FICO score, no matter how many insurers a driver compares.
How Much More Do Drivers With Low FICO Scores Actually Pay in 2026?
The honest answer: it depends heavily on the study, state, and insurer. Several 2026 rate analyses have measured the credit penalty using different data sets, and results vary widely enough that no single number tells the whole story.
| Source (Year) | Key finding |
|---|---|
| Insurify (2026) | Poor-credit drivers pay $2,602 a year for full coverage versus $1,853 for excellent credit — a 40% gap |
| Bankrate (November 2025) | The gap between credit tiers can reach 105%, depending on the carrier |
| The Zebra (2026, 83 million quotes analyzed) | Very poor credit costs $4,581 a year more than exceptional credit — up to a 273% difference |
| ValuePenguin (2026) | Poor credit raises full-coverage premiums by 98% nationally, on average |
| Insure.com (2026) | Poor-credit drivers pay about 113% more, roughly $2,900 a year, than good-credit drivers |
| CNBC Select, citing Bankrate data (2026) | Drivers with a FICO score below 579 pay 118% more than drivers scoring above 800 |
The penalty also depends heavily on the insurer within the same state. In Alabama, GEICO policyholders with bad credit pay an average of $927 more than good-credit customers, while Auto-Owners policyholders pay $4,024 more, per 2026 insurance.com data — over $3,000 apart for the identical credit profile, based purely on which company wrote the policy. ValuePenguin's 2026 research found that USAA, GEICO, and Root show smaller-than-average swings between credit tiers, while State Farm has been flagged in multiple 2026 analyses as one of the heavier bad-credit penalizers.
A first-time buyer with a thin credit file can fall into a similar trap: someone who has never carried a credit card is sometimes priced almost as high as someone with a damaged history, since insurers treat "no credit" as an unknown risk.
Which States Ban or Restrict Credit-Based Car Insurance Pricing?
Four states — California, Hawaii, Massachusetts, and Michigan — ban insurers from using credit history to set car insurance rates at all, according to 2026 surveys from Compare.com and ValuePenguin. California's restriction traces back to Proposition 103, a 1988 ballot measure that limits rating factors to driving record, annual mileage, and years of driving experience.
Several more states impose partial limits. Maryland and Oregon allow insurers to use credit on a new policy but forbid using it to cancel coverage or deny renewal. Utah restricts credit to producing discounts, not surcharges, during a policy's first 60 days. Washington briefly banned credit-based pricing in 2021 as a pandemic-era protection, but a court struck the rule down on procedural grounds, and the practice is legal there again as of 2026 — a reminder that these rules shift more often than older articles suggest. Lawmakers in Iowa, New York, Oklahoma, and Pennsylvania introduced fresh bills in 2026 to restrict or ban the practice, according to Live Insurance News.
Traffic tickets and other violations can move a premium just as sharply as a credit tier — worth knowing before assuming credit alone explains a high quote.
Which Car Insurance Companies Are Best for Drivers With Bad Credit?
No single ranking is definitive, since each comparison site pulls quotes from a different sample of ZIP codes. Still, a handful of insurers turn up repeatedly across independent 2026 studies as strong options for drivers with a low FICO score.
| Insurer | Why it stands out for low-FICO drivers | Cited by (Year) |
|---|---|---|
| Travelers | Cheapest large insurer for bad credit in 13 states; low complaint volume | LendingTree, Forbes Advisor (2026) |
| American Family | Lowest average monthly rate among major carriers sampled | ValuePenguin (2026) |
| GEICO | Competitive pricing and a fully digital quote-to-purchase process | ValuePenguin, CNBC Select, Insure.com (2026) |
| USAA | Strong rates and broad coverage for military families and veterans | Forbes Advisor, Insure.com, Compare.com (2026) |
| Nationwide | SmartRide and SmartMiles telematics programs can offset part of the credit penalty | Insure.com, CNBC Select (2026) |
| Country Financial | Lowest quoted rates for drivers combining poor credit with a rough driving record | Compare.com, Insurify (2026) |
| Erie | Highest-rated claims handling and collision-repair grade among companies reviewed | Forbes Advisor (2026) |
Progressive is worth a quote too: it openly discloses using credit data as a rating factor and typically re-runs it at renewal, so an improving credit history should show up over time. USAA's options are limited to military families and veterans, which explains why it appears on so many "best" lists without being available to everyone. The safest approach is still requesting quotes from three to five insurers directly, since national averages can miss how a specific ZIP code and driving history price out.
What About Drivers Standard Insurers Won't Cover?
Drivers combining a low FICO score with a DUI, a coverage lapse, or an SR-22 filing requirement often need a non-standard, or high-risk, insurer rather than a mainstream carrier. An SR-22 is not a type of policy; it is a certificate an insurer files with a state's motor vehicle department confirming a driver carries the legally required minimum coverage after a serious violation.
Specialty carriers such as Dairyland, The General, and Safe Auto focus on drivers that standard-market insurers decline. Dairyland in particular specializes in low or limited credit history and can handle SR-22 and FR-44 filings directly, according to 2026 CNBC Select research, while brokers such as Good2Go and Freeway Insurance shop the non-standard market on a driver's behalf. Coverage costs more than a standard policy, but it exists precisely so a damaged credit history or violation doesn't leave someone unable to legally drive.
How Does the US Approach Compare With the UK, Canada, and Australia?
The United States is unusual by international standards in how heavily it leans on credit history to price car insurance, and the contrast is instructive for any reader wondering whether the practice is simply how insurance works everywhere.
In the United Kingdom, insurers run only a soft credit search to confirm identity when generating a quote, and that search never affects a credit score. A Financial Conduct Authority (FCA) survey found that 5.5 million UK adults had missed a bill or borrowing repayment within a six-month period in 2024 — part of why insurers still weigh some financial signals, though there is no FICO-style tiering system setting the base premium as there is in the US. Paying annually means credit is not reassessed; paying monthly counts as a credit agreement and triggers a hard search instead. The Financial Ombudsman Service (FOS) handles UK insurance complaints.
Canada splits by province. Ontario and Newfoundland and Labrador ban insurers from using credit score for auto insurance entirely, while British Columbia, Manitoba, and Saskatchewan run public auto insurance monopolies that don't use credit at all. Alberta, Quebec, New Brunswick, and Prince Edward Island permit credit-based pricing with consent, though it is used inconsistently even where allowed. The Insurance Bureau of Canada (IBC) maintains a voluntary code requiring consent and barring cancellation for poor credit alone.
Australia does not use credit scores for car insurance approval or pricing at all. Comprehensive premiums are set from driving-risk factors — age, location, vehicle, claims history — and 2026 estimates from Australian comparison sites put average comprehensive premiums roughly between A$800 and A$2,700 a year (about US$550 to US$1,860 at mid-2026 exchange rates), depending on the state. Compulsory Third Party (CTP) insurance, called a Green Slip in New South Wales, is mandatory and priced by state formulas that ignore credit entirely. The Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) regulate insurers, while the Australian Financial Complaints Authority (AFCA) handles disputes.
| Area | United States | United Kingdom | Canada | Australia |
|---|---|---|---|---|
| Primary regulator | State insurance departments, coordinated by the National Association of Insurance Commissioners (NAIC) | Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA) | Provincial regulators; Insurance Bureau of Canada (IBC) code of conduct | APRA, ASIC |
| Complaints body | State insurance commissioner / NAIC consumer hotline | Financial Ombudsman Service (FOS) | Provincial insurance ombudsman services | Australian Financial Complaints Authority (AFCA) |
| Credit used for auto pricing? | Yes, in roughly 46 states; banned in CA, HI, MA, MI | Soft check for identity only; no FICO-style tiering | Banned in Ontario and Newfoundland and Labrador; not used by public insurers in BC, Manitoba, Saskatchewan | No — priced on driving-risk factors instead |
| Currency | USD | GBP | CAD | AUD |
A driver relocating from Toronto to Texas may be surprised to discover that credit history suddenly matters at renewal time. A driver moving the other direction, from Michigan to Melbourne, can stop thinking about it altogether.
How Can You Lower Your Premium Beyond Fixing Your Credit?
Credit repair takes months or years to move the needle, but other levers work immediately. Requesting quotes from three to five insurers remains the single most effective step. Usage-based, or telematics, programs reward safe driving directly: Nationwide's SmartRide can cut premiums by up to 40%, and GEICO advertises a safe-driving discount of up to 22% after five accident-free years. Raising a deductible, where finances allow, lowers the premium in exchange for paying more out of pocket after a claim, and some states run low-cost programs for qualifying households — California's program, for instance, can price coverage as low as $279 a year.
A full list of stackable savings, including insurer-specific discounts, is covered in this companion guide, which pairs well with the credit-specific strategies here. Because many insurers re-check credit at renewal — Progressive is explicit about doing so — improving an actual FICO score should show up as a lower premium over time, even without switching companies.
What Should Drivers Watch Out For, and Where Is This Heading?
No insurer guarantees a specific savings amount for improving credit, and credit is only one factor among several, alongside driving record, vehicle type, location, and coverage limits. Consumers generally cannot verify their own credit-based insurance score directly, since the formula is proprietary to each insurer. In most states, a falling score alone cannot get a policy cancelled mid-term; the real risk shows up at renewal, when premiums can jump in the roughly 46 states that allow the practice. Rules also change faster than many drivers expect — Washington's ban was overturned by a court, and 2026 legislative proposals could add new banned states before a policy's next renewal.
Consumer advocates, including the Consumer Federation of America, have long argued that credit-based pricing unfairly punishes people already facing financial hardship, an argument that gained fresh traction in 2026 with bills in Iowa, New York, Oklahoma, and Pennsylvania. The insurance industry has pushed back, arguing in past fights — including Washington's 2021 attempt at a ban — that removing credit as a factor could shift costs onto other policyholders rather than lower them overall. Both sides raise defensible points, and it remains genuinely unclear how many 2026 bills will become law.
Key Takeaways
- A low FICO score can raise a car insurance premium by 40% to well over 100%, but the size of the penalty depends more on the insurer than on the credit tier alone.
- California, Hawaii, Massachusetts, and Michigan ban credit-based auto insurance pricing outright; several other states only partially restrict it.
- Comparing quotes from several insurers usually saves more, and faster, than waiting for a credit score to improve.
- Non-standard insurers exist specifically for drivers that standard carriers decline.
- The UK, most of Canada, and Australia rely far less, or not at all, on credit history to price car insurance.
Frequently Asked Questions
Does getting a car insurance quote hurt my credit score? No. Insurers run only a soft inquiry to generate a quote, in the US and the UK alike, and a soft inquiry never lowers a credit score, no matter how many insurers a driver compares. A hard check only applies when someone pays monthly instead of annually, since that arrangement is technically a short-term credit agreement.
Which states don't let insurers use credit scores for car insurance? California, Hawaii, Massachusetts, and Michigan ban it outright. Maryland, Oregon, and Utah allow some use but restrict how it affects renewals or cancellations, and Washington's 2021 ban was later struck down in court, making the practice legal there again as of 2026.
Can bad credit get my car insurance policy cancelled? Rarely mid-term. Maryland and Oregon explicitly bar credit-based cancellations and non-renewals even though both allow credit to set the initial price. The bigger risk, in the states that permit the practice, is a sharp increase at the next renewal rather than a cancellation.
Does the UK, Canada, or Australia use credit scores for car insurance like the US does? No, not to the same degree. UK insurers run only a soft check to confirm identity. Ontario, Newfoundland and Labrador, and Canada's public auto insurers don't use credit at all, and Australian insurers price policies on driving-risk factors instead, with Compulsory Third Party cover ignoring credit entirely.
What Should You Do Next?
The single most important lesson here is simple: a low FICO score raises the price of car insurance, but it is rarely the most expensive part of the equation. The gap between what one insurer charges and what another charges for the identical credit profile is often larger than the gap between a poor score and an excellent one — which makes shopping around, not just credit repair, the fastest lever most drivers have.
The bigger picture reaches past US borders. Drivers in Ontario, across most of Canada's public auto insurers, and throughout Australia are reminded every renewal that a driving record can matter more than a bank balance — a contrast that has helped fuel a small but growing legislative push in several American statehouses. Whether that push succeeds in 2026 and beyond is genuinely uncertain, and both consumer advocates and insurers raise defensible arguments about what a credit-free system would do to premiums overall.
This article is educational information, not personalized insurance advice, and rules vary by state, insurer, and individual policy. A licensed agent, broker, or state insurance department can confirm exactly how credit affects a specific quote. For more on what else shapes a car insurance bill, explore more car insurance guides on Shield & Strategy — and feel free to share your own experience shopping for coverage with less-than-perfect credit in the comments below.
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