No Credit Check Car Insurance Companies
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The right auto insurance can offer you financial peace of mind in case of an accident, theft, or natural disaster. But if you have a low credit score or are working to rebuild your credit, you may have heard that you’ll pay more for auto insurance if your credit score is too low.
While it is true that some car insurance companies do use your credit score to determine your rate and decide whether or not to approve you as a customer, that’s no longer the case with all car insurance companies. In this guide, we’ll walk you through how credit scores and car insurance are related, list some providers that do not require a credit check and offer some quick tips on how to improve your credit score.
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Why do car insurance companies care about credit scores?
It may seem like auto insurance and credit scores have little in common. While the latter refers to a three-digit number used to represent your financial health and the way you use credit accounts, the former is a service you pay for to protect yourself from financial liability in case of an accident.
So, why do credit scores matter to car insurance companies? According to the Insurance Information Institute (III), there’s a positive correlation between the number of insurance claims filed and having a lower credit score. In short, based on historical data, car insurance providers have learned that those with low credit scores are more likely to file claims than those with higher scores. In a car insurance company’s eyes, this makes anyone with a low credit score more of a risk to insure.
What credit score do auto insurance companies require for applicants?
The truth is, there’s no one answer to this question. Each insurance provider has its own set of guidelines and standards for approving applicants. But, many insurance companies use what’s known as an insurance score rather than a credit score to determine whether to approve your application.
An insurance score is obtained based on your credit report. In many respects, it’s similar to a credit score, except it doesn’t analyze how much money you make. Instead, it just focuses on how you manage your money, particularly noting how much credit you have access to versus how much debt you hold.
Insurance scores also contain other information that is of interest to auto insurance providers. Details such as lapses in auto insurance coverage, speeding and other driving-related tickets, and car accidents also go into calculating your insurance score. FICO, one of the major credit scoring models, creates insurance scores for insurance companies.
Since you don’t have access to your insurance score, it’s hard to say what the corresponding credit score would be. However, using FICO’s credit score model, a 670 score or higher is considered “good.”
Whether an auto insurance provider uses a credit score, insurance score, or neither depends on the company’s specific policies and state laws.
How a low credit score could impact your auto insurance costs
While you could ultimately be denied auto insurance for having a low credit score, in most cases, applicants with low scores will be approved, but at a higher rate. According to Consumer Reports, if you have a poor credit score, you could end up paying $500 to $2,000 more for auto insurance annually.
Even if your credit score isn’t low, if an insurance provider uses your insurance score to calculate your risk and you have a driving history of traffic violations or driving-related tickets, a lapse in auto insurance coverage, or accidents on record, this could lower your score and cause you to pay more for your insurance premium.
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State restrictions on auto insurance premiums based on credit history
Each state has its own laws for auto insurance providers. A few limit credit checks or ban auto insurance providers from using them to determine if an applicant is eligible. This is mainly done to protect low-income applicants, who often have lower credit scores and, as a result, are charged more for auto insurance.
In both Utah and Oregon, auto insurance companies are not allowed to cancel or refuse to renew your current auto insurance plan based on information obtained from your credit report. They can, however, use your credit score to set your premium. This means it’s likely you’ll pay more for auto insurance if you have a low credit score.
Five states do not allow car insurance companies to use credit scores to set auto insurance rates. This means you won’t be charged higher premiums if you have a low credit score. These states include:
- California
- Hawaii
- Massachusetts
- Michigan
- Washington
*Washington’s ban was passed as an emergency order in 2021, and, as of this writing, is only temporary.
Auto insurance companies that don’t require credit scores
If your score falls into the fair or poor range (under 670) and you’re worried you won’t be approved for car insurance — or if you’ve already been denied — then you might turn to companies that do not use your credit report data to approve your insurance application.
CURE
This auto insurance company was founded on the premise that everyone deserves to pay a fair rate for insurance, regardless of their salary, education level, and credit score. Cure does not use credit or insurance scores in its application processes, making it easier for drivers with bad credit to get approved.
On the downside, CURE auto insurance is only available in a handful of states — New Jersey, Pennsylvania, and Michigan.
You can learn more at https://www.cure.com.
Dillo
Dillo is another car insurance provider who does not use credit scores or even accident history to make insurance approval decisions. This provider also does not charge more if you have a lower credit score or ticket and accident history.
Unfortunately, Dillo is only available in Texas, limiting the number of applicants able to apply for this coverage.
You can learn more at http://www.dillo.com.
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Affordable auto insurance options if you have a low credit score
Currently, CURE and Dillo target only four states in the US. If you don’t live in one of these four states — or a state that limits how and if auto insurance providers can use your credit score to end or upcharge your policy — there are steps you can take.
Opt into usage-based auto insurance
One way to get around credit score requirements is to opt for usage-based auto insurance. This type of car insurance is priced based on how often you drive rather than charging a fixed premium. As a result, credit scores usually aren’t required, and even if they’re run, don’t factor into this pay-per-mile style of billing.
This type of insurance could be helpful to those who work from home, live only a few miles from their job, or for others who do not drive often. If you’re a heavy commuter, you’ll likely pay more for this type of insurance — but getting a quote and doing an estimation can help you better decide.
Companies that offer usage-based insurance include:
- Allstate Drivewise
- Nationwide SmartRide
- Esurance DriveSense
- Karma Drive
- Progressive Snapshot
- State Farm Drive Safe & Save
- Liberty Mutual RightTrack
Consider telematics insurance
Telematics auto insurance (also sometimes grouped under usage-based insurance) uses a monitoring device to track how safely you drive. This device is typically installed in your car or booted via an app. While insurance providers offering telematics plans usually run a credit check, your insurance premium is typically lower if you drive safely and higher if you do not. The monitoring devices typically measure your speed and how quickly you press the brakes.
Companies that offer telematics insurance include:
- Allstate Drivewise
- Geico DriveEasy
- Progressive Snapshot
- State Farm Drive Safe & Save
Review all available auto insurance discounts
While you can’t improve your credit rating overnight, you can take advantage of other discounts you may not have opted into to lower your car insurance premiums. Be sure to enroll in electronic statements and AutoPay when possible. This simple step can often save you some dollars.
Auto insurance companies also offer a variety of discounts ranging from safe drivers to good student discounts. If you own a home or rent, you can also save some money by bundling your homeowners' insurance policies together. In addition, if you opt to pay every six months or annually, you can often save some money.
Lastly, be sure to compare the best rates with other auto insurance providers to make sure you’re getting the cheapest car insurance. You can obtain free quotes from each, and if you use a site like Gabi, you can get multiple quotes at once and then connect with an insurance agent to finalize your purchase.
How to improve your credit score
If you want to reduce your auto insurance bill, boosting your credit score can help. While this may sound overwhelming, there are simple steps you can take to begin growing your score.
Assess your debt
First, you need to look at how much debt you hold, so you can create a plan to repay it. You can use CreditKarma or Intuit Turbo websites to pull your credit score and review any credit accounts and balances. Make a note of any mistakes, and be sure to dispute them if you think the information is incorrect.
Create a repayment plan
Next, it’s time to chip away at your existing debt. There are many different debt repayment strategies out there, but the most important is that you pay at least the minimum (ideally more) on each account, on time, each month. Create a budget to determine how much you can afford to pay each month, and divide that number across your accounts.
Enroll in AutoPay when you can to ensure you’re paying on time. On-time payments are one of the factors that make up your credit score, so demonstrating a pattern of on-time payments will be helpful.
Credit utilization — how much debt you hold versus how much credit you have available to you — also counts for a large part of your credit score. Every time you pay down a balance (assuming you’re not charging more on your cards), your utilization rate will decrease, which can help boost your credit score.
Apply for a secured card
If you have poor credit because of financial mistakes in your past, you may be struggling to rebuild your credit and wondering how to get approved for a credit card. Secured cards — cards that require a security deposit — are easier to apply for even if you have no credit.
These cards can help you begin to demonstrate healthy credit habits. Use them strategically to charge small purchases and pay them off in full before the end of the month. Over time your score should start to climb, and your card provider may even offer you a non-secured account.
When ready, compare car insurance quotes
Once you’ve been working on your credit score for a while — say six months — you can begin looking for better auto insurance quotes. First, check your credit score for free to ensure it’s improved. If it has, you can start requesting quotes from different insurance companies or use a comparison site such as The Zebra to determine how much you could save.
The bottom line
Your credit score is often used to determine if you’re eligible for auto insurance and, if so, how much your insurance premium will cost. Many auto insurance companies charge those with low credit scores more since they tend to file more claims and are thus viewed as more of insurance risk.
While some states restrict how insurance companies can use credit scores to cancel policies or raise premiums, most states do not offer these protections. While there are a few no-credit-check auto insurance options, these options are not available for most US. Usage-based insurance and telematics insurance can help those with low credit scores lock in lower rates. Alternatively, you can improve your credit while also ensuring you take advantage of all offered discounts and always comparing rates across providers.
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Writer
Courtney Johnston is a freelance writer, specializing in finance, travel, and health. She has written for The Chicago Tribune, Benzinga, BestReviews, Mashvisor, Fundera, MoneyGeek, and The Culture Trip. She also teaches writing instruction at the University of Indianapolis. Courtney currently resides in Indianapolis.
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