Auto Insurance Without Credit Checks: Where To Find It

If you have a poor credit history, it can be challenging to find affordable car insurance. While most insurers use credit checks to create a credit-based insurance score to help set your rate, some insurers provide auto insurance with no credit check. In certain states, laws don't allow the use of credit information as part of car insurance pricing. These states include California, Hawaii, Maryland, Massachusetts, Michigan, Oregon, Utah, and Washington.

If you live in a state that allows credit checks, there are still ways to save on your auto insurance premiums. For example, you can use telematics-based insurance, which tracks your mileage and driving behaviour to compute premiums. You can also consider non-standard insurance, which caters to high-risk drivers, or shop around and compare policies from different insurers.

Usage-based insurance

While most car insurance companies use credit checks to create a credit-based insurance score to help set your rate, some insurers provide auto insurance with no credit check. However, purchasing car insurance from a company that doesn't check credit doesn't necessarily mean you'll pay a lesser rate than you will with a company that does.

UBI is opt-in, although some insurance companies specialize entirely in usage-based auto insurance. Many traditional auto insurance companies use factors such as age, gender, and even credit history, without considering how you drive in real-time, which might not accurately represent whether you are a risky driver.

With UBI, you pay how you drive. This means the safer you drive, the more you can save. Common driving behaviours that are tracked include speed, braking, acceleration, cell phone use, and time spent driving. Many UBI programs require you to install an app on your smartphone, although some may require installing a separate tracking device in your vehicle.

UBI gives you more control over your insurance rates by focusing on factors that you can influence. It can also help you become a smarter, safer driver by making you more aware of your driving habits.

• Nationwide SmartMiles
• Allstate DriveWise
• Hugo
• Metromile
• Progressive Snapshot
• State Farm Drive Safe & Save
• USAA SafePilot
• GEICO DriveEasy

Telematics-based insurance

Pay-as-You-Drive Insurance

This type of telematics-based insurance sets rates based on the number of miles driven. It is often referred to as pay-per-mile insurance and is ideal for those who drive less than 12,000 miles per year. Insurance companies will typically charge a base rate, which is influenced by factors such as age and driving record, along with a per-mile fee. This means that the more you drive, the higher your insurance rate will be.

Behaviour-Based Insurance

Behaviour-based insurance offers discounts on insurance rates for those who drive safely. Insurance companies will track driving behaviour through a telematics app or a device installed in the car. The data collected will include information such as speed changes, time of day, miles driven, phone usage, and location. Based on this data, insurance companies will reward safe driving habits with discounted rates.

Pros and Cons of Telematics-Based Insurance

One of the biggest disadvantages of telematics-based insurance is the loss of data privacy, as insurance companies will have access to personal data such as location and driving habits. Additionally, some programs may raise base rates if the data collected indicates unsafe driving behaviours. However, telematics-based insurance can be beneficial for those with low credit scores, as it allows individuals to prove they are safe drivers deserving of lower rates. It also provides insights to help improve personal driving habits.

Telematics Insurance Providers

Several insurance companies offer telematics-based insurance programs, including:

• Allstate (MileWise and DriveWise)
• Nationwide (SmartMiles and SmartRide)
• Geico (DriveEasy)
• Progressive (Snapshot)
• American Family (KnowYourDrive and MilesMyWay)
• Farmers (FairMile and Signal)
• Liberty Mutual (RightTrack)
• State Farm (Drive Safe and Save)
• Travelers (IntelliDrive)

Non-standard insurance

Non-standard auto insurance is a category of insurance designed for drivers who insurance companies consider to carry the most risk of an accident. This type of insurance is typically more expensive than a traditional car insurance policy because the insurance company believes there is a greater likelihood that the driver might file a claim due to an accident.

Insurance companies consider drivers to be high-risk if they have a poor driving record, a history of accidents, or other factors that the insurer considers to be higher risk. These factors can include:

• A suspended or revoked driver's license
• Multiple accidents, traffic violations, or speeding tickets
• Driving under the influence (DUI) without a license or without insurance
• Little driving experience
• Little or no history of car insurance
• Driving a high-performance or custom-built car
• Driving a "salvage title" car, meaning it's been severely damaged or declared a total loss
• Living in an area with high rates of theft or vandalism
• Being an inexperienced driver (often under 25) or an elderly driver
• Holding a foreign driver's license
• Having a gap in your auto insurance history
• Buying only the minimum liability insurance required in your state
• Getting your auto policy canceled or non-renewed
• Poor credit history

Some insurance companies refer to non-standard insurance as "high-risk auto insurance". Not all insurance companies offer non-standard insurance, and those that do typically charge higher monthly premiums.

If you are unable to obtain non-standard insurance from an insurance company, you may need to turn to your state's assigned-risk pool, which provides insurance to high-risk drivers who cannot get coverage elsewhere. However, this is a last resort, as the rates tend to be even higher than those offered by non-standard insurance companies.

Insurance in certain US states

In the United States, insurance companies use credit-based scores to determine a customer's insurance rate. This is based on the likelihood of a future accident or claim, with drivers who have excellent credit paying lower rates than those with poor credit or no credit history. However, certain states have laws prohibiting the use of credit information in car insurance pricing. These include California, Hawaii, Maryland, Massachusetts, Michigan, and Washington.

In these states, insurance providers do not conduct credit checks. For instance, in California, Hawaii, Massachusetts, and Michigan, insurance companies cannot use credit scores to set auto insurance rates. Meanwhile, in Maryland, insurance companies can use credit scores to determine premiums but cannot refuse to insure or cancel a policy based on credit history. Similarly, in Oregon and Utah, credit scores cannot be the basis for cancelling or refusing to renew coverage, but they can be used when underwriting a new policy.

While it is challenging to find insurers that do not conduct credit checks outside of these states, there are some companies that offer auto insurance without credit checks. These include Cure Insurance, available in Michigan, New Jersey, and Pennsylvania; Dillo Insurance in Texas; and Empower Insurance, also in Texas.

Additionally, usage-based and telematics car insurance policies, which base premiums on driving behaviour and mileage rather than credit history, are other options for those seeking auto insurance without a credit check.

Improving your credit score

Make On-Time Payments

Paying your bills on time is crucial for improving your credit score. Your payment history makes up a significant portion of your credit score calculation, and late or missed payments can negatively impact your score. Set up autopay or calendar reminders to ensure you never miss a payment due date.

Pay Down Revolving Account Balances

It's important to keep your credit utilization rate low. Aim to keep your credit card utilization below 30%, but the lower, the better. Pay off any high credit card balances and consider different repayment strategies, such as debt consolidation loans or balance transfer credit cards.

Don't Close Your Oldest Account

Avoid closing your oldest credit accounts, as this can hurt your credit score. The length of your credit history is a factor in your score, and closing old accounts can shorten your credit history and decrease your overall available credit.

Diversify Your Types of Credit

Having a mix of different types of credit can improve your score. This includes a combination of credit cards, auto loans, mortgages, or other types of loans. However, avoid taking on more debt than necessary just for the sake of building credit.

Limit New Credit Applications

Each time you apply for new credit, it results in a hard inquiry on your credit report, which can lower your score. Only apply for new credit when necessary, and consider prequalification options that use soft credit checks instead.

Dispute Inaccurate Information

Review your credit reports for any inaccurate or fraudulent information and dispute any errors with the credit bureaus. Common errors include incorrect reporting, duplicate debts, or late payments that you made on time. Disputing these issues can help improve your score.

Additionally, some general tips for improving your credit score include increasing your credit limit, becoming an authorized user on a loved one's credit card, and using rent-reporting services or Experian Boost to get credit for on-time rent and utility payments. Remember that improving your credit score takes time and consistency, but by following these tips, you can work towards a stronger credit profile.

Frequently asked questions