Car insurance for drivers with bad credit

You might be aware that having a poor credit score can make it harder to borrow money. But a poor credit score can also affect your car insurance premiums or, in extreme cases, mean certain insurers won’t offer you cover. Our guide explains why and what your options are.

Why might an insurer look at your credit score?

If you get a quote from an insurer, it will typically check your credit file just to verify your identity. It’ll do this through a “soft search”, which won’t affect your credit score.

If you decide to apply for cover and you opt to pay in monthly instalments, the insurer is effectively loaning you the lump sum for a year’s worth of insurance and letting you repay it in monthly chunks, with interest. So, when you opt to pay monthly, an insurer typically runs a “hard search”, which is visible on your credit file. The insurer does this to track your record of borrowing money and repaying it on time to check if you’re likely to make your repayments.

If your credit score isn’t great, your insurer might charge more for letting you repay in monthly instalments (even people with a good score are likely to pay interest if they repay monthly). Or it might offer you cover but only if you pay up front in a lump sum.

In extreme cases, some insurers might refuse to offer you cover. This is fairly unusual, though. Insurance companies can simply cancel your cover if you fail to pay your monthly premium on time, so this type of lending is considered low risk for most insurers.

It’s worth knowing that if you miss a monthly repayment, this can damage your credit score.

What factors affect car insurance rates?

Many factors play into what you pay each month for car insurance — some are under your control, and others aren’t.

• Location. Rural drivers typically pay less for their insurance than urban drivers. The fewer motorists you encounter while driving, the lower your accident risk.
• Driving record. The longer you go without an accident, the more likely you are to get a lower rate. If you have any recent accidents or tickets on your record, see if your provider offers a discount for completing a defensive driving course. Proving your worth on the road might bring down your rate.
• Age and driving experience. Providers consider young and inexperienced drivers riskier on the road. If you’re aged under 25 or new to driving, ask a parent or family member if they’re willing to add you to their policy for potentially lower rates, or consider a policy where you get a telematic “black box” installed. This monitors your driving and can lower your premiums if you’re young but a reliable driver.
• Type of vehicle. Older cars, convertibles, high-performance or high-value vehicles and cars known for attracting theft and vandalism can be more expensive to insure.
• Vehicle value. Expensive cars can cost more to fix if damaged or cost more to replace if written off.
• Vehicle use. You’re likely to pay more if you use your car for commuting rather than keeping it parked at home during the week.
• Vehicle security. If you park your car on the street overnight, it’s more vulnerable to break-ins or theft. But if your car is secured in a garage, your premiums could be reduced. Any device that could put off thieves, such as alarms, could also help to reduce your premium.
• Occupation and annual mileage. Teachers, accountants and engineers tend to get better rates, while certain professions mean more time spent on the road. You have to be honest about your job, but certain job titles will produce a lower premium even when describing the same job, so it’s worth running alternatives through a quote engine. When shopping around for a new provider, ask about discounts for low annual mileage to potentially save more.
• Claims history. If you’ve made claims in the past 5 years, this could increase your premium.

Does insurance help your credit?

Paying monthly for a car insurance policy can have a positive effect on your credit score, as it counts as a kind of “instalment loan”. If you pay in full and on time every month, this can build up your credit score over time.

However, this will likely only help people who have a bad credit score due to a lack of credit history, as opposed to having things like missed payments or debt on their record. It is less likely that you will be offered monthly instalments if you have a history of debt, but paying in full for your annual car insurance if you can afford to do so is the best option either way.

Bottom line

Getting car insurance if you’re a driver with bad credit is not impossible and you might be able to pay monthly, though it’s likely a credit check would be involved.

Compare your options for car insurance with bad credit to find the best cover for you. For more tips on keeping your rates low, read our comprehensive guide to car insurance.

Frequently asked questions

• What discounts can make my rates more reasonable while I rebuild my credit?

  There are a handful of special discounts to look for here. One is to move every form of insurance you have under one provider, which should net you a multi-line discount. You can also look into how your job field might get special consideration from certain providers. Educators, healthcare employees, government workers and military veterans often receive discounted rates from large insurance providers.

• What do I do if I can't afford an annual car insurance payment?

  Many car insurance companies might still offer you monthly payments, even if you have bad credit. This is because car insurance doesn’t pose as much of a risk to companies as loans, for example. If you fail to keep up with your premiums, your car insurance can be cancelled and so the loss to the provider can be minimised.

  Paying your car insurance premiums in monthly instalments usually costs more in the long run, but it does save you having to fork out a large lump sum in advance.

• Should I opt for third-party only insurance to lower the cost of my premium?

  If you really need to keep the cost of your car insurance down, taking out third-party only car insurance is one way to do that. However, this is a risky option, as your car will not be covered for any damage or theft. If your car’s value is low, this might not matter so much, but consider whether the cost of replacing the car with no help from your insurance company might be greater than the cost of the extra premium.

  Having bad credit won’t necessarily affect the cost of your premium anyways. Insurers take into account previous motoring convictions and points on your license when calculating your premium, but a bad credit history is more likely to affect whether you can pay monthly rather than the quote you receive.

• Can I get car insurance with a CCJ?

  Yes, but you must declare it when applying for cover. The same is true for an insolvency order, unspent criminal convictions and cancelled insurance policies. Failure to do this can invalidate your policy.

  For some insurers, a CCJ might make you a higher-risk customer and can push your premiums up. If the CCJ is related to a motoring offence or if you had a previous insurance policy cancelled by the provider, you might be looking at a particularly high premium.

  The best way to find out what impact your CCJ will have on your insurance is to compare quotes and see what you get back.

• Do car insurance providers check your credit rating before application?

  Car insurance companies perform what is called a “soft search” of your credit history when providing you with a quote. This type of check doesn’t affect your credit score and is only meant to check that you are who you say you are.

  If you choose to pay for your car insurance in monthly instalments, the insurer will usually run a “hard search” of your credit file, which will be visible to everyone who runs a credit check on you in future. Having too many of this type of search on your file can negatively affect your score.

  Paying for your car insurance up front is the best way to make sure it doesn’t impact your credit rating. However, if that is not an option for you, keeping up with monthly payments can also protect your score from slipping.

• What car insurance companies do not check credit?

  When you take out a quote for car insurance, the provider usually only does a soft search of your credit. This is only aimed at making sure you are who you say you are and doesn’t show up on or affect your credit score.

  If you opt to pay by monthly instalments, that’s when some companies might do a hard search of your credit, which will reveal your credit history and can affect your score. Paying up front for your annual policy is a good way to prevent your credit history becoming an issue, provided you can afford to do so.

  If this is not possible, unfortunately, you will likely struggle to find an insurer that won’t check your credit. The good news is that you’ll probably still be offered cover, but it may be more expensive, and you might not have the option to pay in instalments.

• What is the cheapest car insurance for bad drivers?

  If you’re a bad driver, you’re unlikely to find a cheap or possibly even affordable car insurance policy. This is mainly because bad drivers are likely to have a history or claims, points on their licence and even motoring convictions, all of which are likely to push up insurance premiums.

  If you’re in this situation and would like to reduce your premiums, you can opt to take out a further driving qualification, like an advanced driving course or a plus pass.

  Note that, if you repeatedly don’t keep to the rules of the road, getting a black box policy is likely to make your insurance more expensive rather than cheaper, as many insurers penalise customers for bad driving.

To make sure you get accurate and helpful information, this guide has been reviewed by Rebecca Goodman, a member of Finder's Editorial Review Board.

Written by

Liz Edwards

Editor-in-chief

Liz Edwards has been a consumer writer and editor for more than 20 years. She led award-winning teams at the campaigning publisher Which?, and has covered a range of consumer rights and personal finance topics including pensions, credit, banking and insurance. Liz has appeared frequently in national media such as The Sun, Metro, HuffPost and The Independent. She loves to cut through waffle to give consumers the real lowdown. And she loves puns. See full bio

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