Car Insurance with Bad Credit in Texas: Rates & How to Save [2026]

If you have bad credit in Texas, you're likely paying hundreds—or even thousands—more for car insurance each year than drivers with excellent credit. The good news? Texas law provides consumer protections, and certain insurers offer much better rates for drivers with poor credit scores.

In this guide, we'll break down exactly how credit affects your car insurance rates in Texas, which companies offer the best deals for bad credit drivers, and proven strategies to lower your premiums starting today.

How Credit Scores Affect Car Insurance in Texas

Texas is one of 46 states where insurance companies can legally use your credit to help determine your car insurance rates. Unlike California, Hawaii, Massachusetts, and Michigan—which ban credit-based insurance scoring entirely—Texas allows insurers to factor credit into pricing decisions.

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But here's the catch: insurers don't use your regular FICO credit score. Instead, they use specialized insurance credit scores from companies like LexisNexis and FICO that predict the likelihood you'll file a claim, not whether you'll repay a loan.

How Much Does Bad Credit Increase Rates in Texas?

According to Insurify, Texas drivers with poor credit pay an average of $296 per month for full coverage, compared to just $211 per month for those with excellent credit. That's an extra $85 per month—or $1,020 per year.

National data from Bankrate shows that drivers with poor credit pay 105% more than those with excellent credit. The Zebra found that bad credit can increase your annual premium by as much as $4,581, or 273%.

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What Credit Factors Do Insurers Use?

Insurance credit scores consider:

• Payment history (40% of score) - late payments, collections, bankruptcies
• Outstanding debt - credit card balances and utilization
• Length of credit history - how long you've had credit accounts
• New credit applications - recent hard inquiries
• Credit mix - variety of credit types (cards, loans, etc.)
• Accounts in good standing - number of positive accounts

Importantly, your income, race, gender, religion, and marital status are not allowed to be used in insurance credit scoring under federal and state law.

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Texas Law on Credit-Based Insurance Scoring

While Texas permits credit-based insurance scoring, the Texas Department of Insurance (TDI) has put consumer protections in place:

Key Consumer Protections:

1. Credit cannot be the only factor - Insurers must consider driving record, vehicle type, location, and other factors alongside credit
2. Mandatory re-checking at renewal - TDI requires insurers to re-check your credit at policy renewal if doing so would lower your premium
3. 30-day adverse action notice - Companies must notify you within 30 days if they deny coverage or charge more because of your credit report
4. Filed scoring models - All credit scoring models must be filed with TDI for regulatory review
5. Disclosure requirements - Insurers must provide Form CD-1 explaining how credit information is used

These protections mean you have rights. If your credit improves, you can request that your insurer re-check it. If you're denied coverage or charged higher rates, the insurer must tell you why and give you a chance to dispute errors in your credit report.

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Average Texas Car Insurance Rates by Credit Tier

Here's what drivers in different credit tiers typically pay for full coverage car insurance in Texas:

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Data from Insurify, SmartFinancial, and industry research

Why the Gap Is So Large

Insurance companies have found statistical correlations between credit history and claim frequency. According to the Insurance Information Institute (III), drivers with lower credit scores file more claims on average, which translates to higher risk for insurers.

However, this doesn't mean you're stuck paying these rates forever. By improving your credit and shopping around, you can significantly reduce what you pay.

Best Car Insurance Companies for Bad Credit in Texas

Not all insurance companies weight credit the same way. Some insurers are far more forgiving of poor credit than others. Here are the best options for Texas drivers with bad credit:

Top 5 Insurers for Bad Credit in Texas:

Rates are estimates based on industry research and may vary by driver profile

Why These Companies Stand Out:

State Farm - Offers some of the lowest rates in the state for drivers with poor credit. Requires membership in Texas Farm Bureau Association.

GEICO - Consistently rated as the best option for bad credit drivers in multiple studies by MoneyGeek and ValuePenguin.

Progressive - Known for being more forgiving of imperfect credit. Their Snapshot program lets you earn discounts based on driving behavior instead of credit. Learn more in our Progressive Texas review.

Fred Loya - Targets underserved markets including drivers with bad credit, no credit, or suspended licenses. Available throughout Texas with local offices. Read our Fred Loya review.

The General - Specializes in non-standard insurance for high-risk drivers, including those with poor credit.

What About USAA?

USAA offers excellent rates but is only available to military members, veterans, and their families. If you qualify, USAA is often the cheapest option regardless of credit tier.

How to Improve Your Insurance Credit Score

Your insurance credit score isn't set in stone. Here are proven strategies to improve it over time:

1. Pay All Bills On Time

Payment history makes up 40% of your insurance credit score—more than any other factor. Even one late payment can hurt you for years.

Action steps:

• Set up autopay for all recurring bills
• Create payment reminders 5 days before due dates
• If you miss a payment, catch up immediately (30 days late is worse than 10 days)

2. Reduce Outstanding Debt

High credit card balances signal financial stress to insurers. Aim to keep credit utilization under 30%.

Action steps:

• Pay down credit card balances, starting with highest interest rates
• Request credit limit increases (without opening new accounts)
• Consider a balance transfer to a 0% APR card if you qualify

3. Check Your Credit Reports for Errors

According to Experian, 1 in 5 credit reports contain errors that could be hurting your score.

Action steps:

• Request free credit reports from all three bureaus at AnnualCreditReport.com
• Also request your LexisNexis insurance report (free annually) at consumer.risk.lexisnexis.com
• Dispute any inaccuracies immediately—corrections can boost your score within 30 days

4. Keep Old Credit Accounts Open

Length of credit history matters. Closing old accounts can actually hurt your score.

5. Limit New Credit Applications

Each credit application creates a "hard inquiry" that can temporarily lower your score. Only apply for new credit when absolutely necessary.

6. Ask Your Insurer to Re-Check Your Credit

Under Texas law, insurers must re-check your credit at renewal if it would result in a lower premium. Call your insurer after improving your credit and request a manual review even before renewal.

States That Ban Credit Scoring (And Why Texas Isn't One)

Only four states have completely banned the use of credit in auto insurance pricing:

States Where Credit Doesn't Affect Car Insurance:

Several other states have partial restrictions: Maryland, Oregon, and Utah all have certain protections or limitations.

Why Doesn't Texas Ban Credit Scoring?

Texas insurance regulators and legislators have determined that credit-based insurance scoring is a statistically valid predictor of risk. However, Texas does require strong consumer protections (disclosure, re-checking at renewal, prohibition on using credit as the sole factor) to prevent unfair discrimination.

Tips to Save on Car Insurance with Bad Credit in Texas

Even with poor credit, there are many ways to reduce your car insurance costs:

1. Compare Multiple Quotes

Different insurers weight credit differently. One company might charge you $400/month while another charges $200/month for identical coverage. Use our comparison tool to get quotes from 10+ insurers in minutes.

2. Raise Your Deductibles

Increasing your deductible from $500 to $1,000 can save you 10-20% on comprehensive and collision coverage. Only do this if you can afford the higher out-of-pocket cost in case of an accident.

3. Take Advantage of Discounts

Most insurers offer 10+ discounts that can stack. Read our full guide to Texas auto insurance discounts for more details.

4. Drop Coverage You Don't Need

If you drive an older vehicle (worth less than $3,000), consider dropping comprehensive and collision coverage. You're only required to carry Texas minimum liability: 30/60/25. Learn more: Best Cheap Auto Insurance in Texas.

5. Improve Your Driving Record

A clean driving record matters more than credit for most insurers. Avoid tickets and accidents, and your rates will drop over time.

6. Shop Around Every Year

Insurers regularly adjust their rates. A company that's expensive for you today might be cheap next year. Set a calendar reminder to compare quotes every 12 months. Check our Texas locations guide for local agents who can help.

Take Action Today

Bad credit doesn't have to mean sky-high car insurance rates in Texas. By understanding how credit affects your premiums, shopping around for the right insurer, and taking steps to improve your credit, you can save hundreds or even thousands of dollars per year.

Next steps:

1. Compare quotes from top Texas insurers (takes 5 minutes)
2. Request your free credit reports and check for errors
3. Ask your current insurer to re-check your credit if it's improved
4. Read our guide on how to lower car insurance in Texas

Don't let bad credit keep you from getting affordable coverage. Start comparing quotes today and see how much you can save.