Car Insurance Soars for Drivers With Poor Credit; Here’s What to Do

Your driving record may be spotless, but if you have poor credit, car insurance companies view you as a risk — and they’re significantly raising your rates.Over the past three years, drivers with poor credit have seen auto insurance premiums surge 37.7%, according to NerdWallet’s 2026 Auto Insurance Rates Report. These price hikes were even steeper than those faced by drivers with good credit who caused a crash or got a DUI.In January 2023, someone with poor credit and a clean driving record would pay a median of $2,864 per year for full-coverage car insurance, NerdWallet’s analysis found. By January 2026, premiums for this driver had risen to $3,944 — an increase of $1,081 per year. By comparison, the same driver with good credit saw an increase of only $576.“Credit scores are one of the most harmful things that results in you paying higher auto insurance premiums,” says Michael DeLong, a research and advocacy associate with the Washington, D.C.-based nonprofit Consumer Federation of America. “The penalties are extremely severe.”While higher premiums after a wreck or DUI may not be a surprise, DeLong says many drivers aren’t aware their credit scores will affect their car insurance rates. To further complicate things, building credit can take months.But there are ways to get relief more quickly. DeLong suggests comparing car insurance quotes from multiple companies, because some insurers penalize poor credit less than others. Raising your deductible, evaluating your coverage and avoiding small claims can also help.Price trends hurt drivers with poor creditNerdWallet’s analysis found that insurers raised rates more sharply from 2023 to 2026 for drivers with poor credit than for those with good credit — even if the poor-credit driver had a flawless record while the good-credit driver had a DUI, speeding ticket or at-fault crash.Driving profileCost in 2026Increase from 2023Poor credit + clean record$3,94437.7%Good credit + DUI$4,47435.9%Good credit + speeding$3,04334.6%Good credit + at-fault crash$3,50332.6%Good credit + clean record$2,35932.3%Median annual rates for full-coverage auto insuranceWhen our sample driver with poor credit also had a recent DUI or speeding ticket, rate increases were even greater. Prices for a full-coverage policy went up by more than 40% for drivers with poor credit and a recent DUI, the biggest increase of any profile we analyzed.Driving profileCost in 2026Increase from 2023Poor credit + DUI$7,01340.4%Poor credit + speeding$4,81538.2%Poor credit + clean record$3,94437.7%Poor credit + at-fault crash$5,58436.7%Median annual rates for full-coverage auto insuranceWhy credit matters to insurersDrivers often think it’s unfair for credit to affect car insurance prices, DeLong says, since it isn’t directly linked to driving behavior. Some states agree; California, Hawaii and Massachusetts don’t allow credit as a factor in setting auto insurance rates.However, insurers say credit scores can indicate the likelihood that a driver will file a claim. They use what’s called a credit-based insurance score — similar to the typical credit scores used by lenders but weighted differently.“It helps in predicting expected claims activity and loss costs more accurately,” said Norman Niami, a member of the American Academy of Actuaries' Automobile Insurance Committee, in an email.The practice has been controversial, with critics arguing it disproportionately hurts low-income and minority drivers. But a Federal Trade Commission report to Congress in July 2007 concluded that credit-based insurance scores were strong predictors of risk even when controlled for income, race and ethnicity.The explanation may be that some people simply tend to take risks, according to a statistical analysis published in the North American Actuarial Journal in 2016. Researchers concluded that risk-taking behavior can affect credit scores as well as insurance claims. Their analysis found that average losses per policy were 64.6% higher for drivers with the lowest credit scores than for those with the best credit.Building credit may help, but it's complicatedWorking to build your credit over time may help lower your car insurance premiums, but it’s not a sure thing. A credit-based insurance score is just one of many factors (along with things like location, age and driving history) that insurers use to rate a person’s risk.Building credit “can produce a noticeable premium decrease in some cases, while producing little or no change in others,” Niami said, depending on whether the new score causes an insurer to move you into a better rating tier. Each insurer sets its own score thresholds, so a score viewed as “poor” by one insurer might be considered “fair” by another.At the same time, consumer advocates argue it’s difficult for many people to take the steps needed to strengthen their credit scores.“Most people probably have some idea that you can improve your credit score by trying to pay your bills regularly and reliably, and using different kinds of financial resources and credit cards,” DeLong says.“But again, that’s easier said than done," he says. "If you’re struggling at a low-wage job and trying to juggle bills, or if you don’t easily have access to a credit card, that advice may not be especially helpful."What drivers can doDrivers with poor credit or no credit may be able to take other steps to lower their premiums. Comparing car insurance quotes from different companies is one of the best ways to ensure you have the cheapest rate possible. Insurers set their own pricing formulas, and some are more forgiving of poor credit than others. A NerdWallet analysis of October 2026 rates found that in about half (49.3%) of U.S. ZIP codes in states that allow credit scoring, the cheapest insurer for a driver with poor credit was a different company than the cheapest for a driver with good credit.Although you can’t improve your risk profile overnight, “there’s a bunch of small things you can do that over a two- to three-year span make you look a lot better” to insurers, says Bradley Flowers, founder of Portal Insurance agency in Mobile, Alabama.Consider a higher deductible. Raising your car insurance deductible — the amount of a future claim that you agree to cover yourself — lowers your premium and signals to insurers that you’re less likely to file a claim. But be sure you can afford to pay the higher deductible if you have to make a claim.Adjust how you’re billed by insurers. By signing up for automatic payments and ensuring you don’t miss insurance payments each month, you’ll get a small discount while improving your risk profile for insurers.Avoid minor claims if you can. Flowers recommends thinking twice about filing minor claims, such as windshield cracks. “When you’re in one of these situations, let’s save our insurance for the really bad stuff,” he suggests.Lastly, be sure your coverage fits your vehicle. If you could afford to replace your car on your own, consider dropping collision and comprehensive coverage to bring your premiums down. Your trimmed-down policy would still provide you with liability coverage after a crash, while leaving you to cover damage to your vehicle.MethodologyNerdWallet's 2026 Auto Insurance Rates Report is based on an analysis of more than 1.4 billion rate estimates provided by Quadrant Information Services for all 50 states and Washington, D.C., from January 2023 to January 2026.Quadrant derives its rate data from modeled estimates based on carrier rating algorithms; figures do not reflect every available carrier or every consumer's individual rate. Liberty Mutual does not participate in Quadrant's rate data and is not represented in this analysis.Quadrant’s figures are modeled rate estimates produced by running a fixed driver profile through carrier rating algorithms. They represent both new business and renewal rate estimates, and they are not a record of what actual drivers paid.NerdWallet anchored its analysis to a 3-year old Toyota Camry LE, ensuring each analysis period reflected rates for the same-aged car.The primary rate analysis is based on a 35-year-old single driver with good credit, no recent at-fault accidents or driving violations, and a full-coverage policy with $1,000 deductibles for collision and comprehensive coverage. Rates are pooled across male and female drivers.In states where drivers must carry other types of insurance not included in our full coverage profile specifications, we added the minimum amount of coverage required by those states. Some policies include additional coverage at the insurer’s discretion.In addition to our base profile driver with good credit and a spotless driving history, we analyzed rates for the following driver profiles:Drivers with an at-fault crash. We added a single at-fault crash causing $10,000 in property damage.Drivers with a speeding ticket. We added a single speeding ticket for driving 16 mph over the speed limit.Drivers with a DUI. We added a single drunken-driving violation.Drivers with poor credit. This is the same as our regular base profile, except the driver has poor credit instead of good credit. We also analyzed rates for drivers with poor credit and each of the three incidents above.NerdWallet applied a strict comparability filter before calculating year-over-year figures. Only coverage variants and carrier/state combinations present in all four years of data were included in median calculations. This ensures reported changes reflect genuine pricing shifts among stable carriers, rather than differences caused by insurers entering markets, exiting, or going insolvent during the analysis period.Article sourcesArticle sources