Car insurance for drivers with bad credit
A guide to getting affordable car insurance with a bad credit history.
Updated . What changed?
What's in this guide?
- Why might insurers look at my credit score?
- What factors affect car insurance rates?
- Save on car insurance with poor credit
- Could my poor credit history affect the premium I pay?
- How does bad credit affect monthly car insurance?
- Does an IVA affect car insurance?
- What is the best insurance company for high risk drivers?
- Where do I start rebuilding my credit?
- Does insurance help your credit?
- Bottom line
- Frequently asked questions
There are many things that can negatively affect your credit score, many of which might be out of your control. This can include a job loss or student debt, and even a misunderstanding with your bank or lender.
However, you can still get car insurance with bad credit, you simply might have to do some more research. Below are some options and resources that can get you on the right track.
Why might insurers look at my credit score?
Finder’s insurance expert Ronny Lavie answers
Insurers look at a range of personal factors, like your age, occupation and the type of car you drive, before making decisions about your insurance. They might also run a credit check for you, to track your record of borrowing money and repaying it on time. This is because letting you pay monthly for your insurance is not unlike loaning you the money for the year.
That said, unlike with a loan, insurance companies can simply cancel your cover if you fail to pay your monthly premium on time, so this kind of lending is considered low risk for most insurers.
In most cases, you will still be able to split your premium into monthly instalments, but your insurance company might bring up the price a bit or make you pay a higher interest rate (interest often applies to monthly payments of car insurance whether you have bad credit or not).
This feels a little counter-productive. Although a bad credit history doesn’t necessarily mean someone is low on funds, some people who have a history of credit issues might struggle to pay a large lump sum upfront or pay more for a product. That’s why it’s worth shopping around to find an insurer who will let you pay monthly and won’t hike up the prices.
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. By proving your worth on the road, you might be able to 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 five 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 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 providers 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?
If your track record of repaying borrowed money is poor, and your credit history reflects this, then you might not be able to get cover or be offered a pay monthly option.
If you are offered a pay monthly option, then your premiums might 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 will 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. This means it is 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 on a monthly basis, your insurer may perform a hard search, which details your credit history and credit score.
If you’re found to have bad credit, the insurer may decide to charge you more in interest on your monthly premiums, as you’ll be considered a higher risk of making your repayments.
Does an IVA affect car insurance?
If your financially 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 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.
Build your credit history while you save with LOQBOX
- Choose what you want to save – from £20 to £200 a month
- Build your credit history with the credit reference agencies
- Leave with an improved credit history, plus all your savings
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.
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.
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