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Car insurance for drivers with bad credit
A guide to getting affordable car insurance with a bad credit history.
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.
Save on car insurance with poor credit
Providers with the strongest rates historically might not accept all credit scores. Thankfully, you’ll find options that can provide cover while you rebuild your credit.
- Choose to pay for your cover in one go. Rather than monthly payments spread out over a year, you might be able to pay for your insurance in one payment. A bad credit report is unlikely to impact you in this case, as the company won’t be “lending” you any funds.
- Look for smaller or nonstandard providers. A handful of car insurers brand themselves as more willing to accept drivers who might have a hard time getting insurance elsewhere.
- Bundle your policies. If you own a policy with a large insurance provider that offers many types of insurance, it could make financial sense to pay for your home, car and life insurance under one provider. Bundling can save you money and might make payments and support more convenient as well.
- Trim your cover. For standard car insurance providers that can help you, the kind of cover you’re used to might cost more than you’re willing to pay. This is where you can strategise about what to cut from your policy without leaving yourself too exposed.
- Increase your excess. Raising how much you will have to contribute to a claim before your insurance kicks in could result in more manageable rates, but make sure it’s an amount you could reasonably afford to pay should you have an accident. This is definitely no place for the “it will never happen to me” approach.
Could my poor credit history affect the premium I pay?
A look into your credit history by the insurer could affect you if you need to pay for your car insurance cover every month in instalments rather than in one go.
If your track record of repaying borrowed money is poor and your credit history reflects this, you might not get cover or be offered an option to pay monthly.
If you’re offered a pay monthly option, then your premiums are likely to be increased. If you can, consider paying for your car insurance in one go.
How does bad credit affect monthly car insurance?
Most car insurance providers give you the option of paying your car insurance premiums on a monthly or yearly basis. However, if you choose to pay monthly premiums, the insurer may add interest to the cost of your premiums, as you’re effectively getting credit on your yearly policy. So, this will likely cost more overall. It’s generally cheaper to pay for your insurance in one annual instalment.
When you apply for car insurance, some insurance providers will perform a soft search credit check to confirm the details you have provided are correct. However, if you then choose to pay insurance monthly, your insurer may perform a hard search, which details your credit history and credit score.
If you have bad credit, the insurer may charge more in interest on your monthly premiums, as you’ll be considered a higher risk of making your repayments.
Having a poor credit score doesn’t mean you can’t get car insurance, but there may be a few more hoops to jump through. It’s important to check your credit score, which you can do for free, so you know where you stand. Even if it is poor, there are lots of ways to improve it over time. If you’re really struggling to find insurance, a specialist provider or broker (the British Insurance Brokers’ Association has a list of approved brokers) may be able to help.”
Does an IVA affect car insurance?
If your financial situation means you have to take out an individual voluntary arrangement (IVA), your credit rating is likely to take a hit.
You should still be able to take out car insurance or keep your policy if you already have one in place, but the option to pay in monthly instalments might not be given to you. If you already have this arrangement in place with your insurer, it will be up to them whether they honour it for the remainder of the policy.
An IVA can also affect the cost of your car insurance. This is unlikely to happen during the term of your policy, but you might find that your premiums increase on renewal. While having an IVA in place might not make you more likely to have an accident, it can make insurers see you as a higher risk of making a claim for things you might otherwise not have bothered to (and just paid for the damage yourself).
What is the best insurance company for high-risk drivers?
Insurance companies price their cover based on how much of a risk they believe a driver is in terms of making a claim. If they deem you to be a higher risk, they will charge you more in premiums to off-set any claims they will have to pay out for as a result of your driving.
Every provider will have its own list of what makes a high-risk customer, but these factors are likely to feature on most:
- You’ve been involved in a car accident (even just the one).
- You’ve received multiple speeding tickets or points on your licence for other driving offences.
- You were convicted of dangerous driving.
As insurers generally prefer having low-risk drivers as customers, they are unlikely to try and attract high-risk drivers by declaring themselves to be a good option for those people.
The exception here is with new and young drivers. These things also make you a higher risk for insurance companies, but providers who cater specifically to these risks do exist. You can read our guides to getting car insurance for young drivers and new drivers to find out more.
As for finding the best car insurance company for your own needs, there is no one size fits all. Your driving history has a big effect on what policy you are offered and how much it costs, but so do a lot of other factors (like your age, location and what kind of car you drive).
Your best bet is to compare car insurance providers and see who offers you the best value deal.
Where do I start rebuilding my credit?
For tips on working toward stronger credit, start with our guide to monitoring and improving your credit score.
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
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*Based on data provided by Consumer Intelligence Ltd, www.consumerintelligence.com (April ’25). 51% of Confused.com car insurance customers could save £462.49.
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