How To Get Affordable Car Insurance With Bad Credit History
A bad credit history can unexpectedly impact more than just loans and credit cards—it can also affect your car insurance premiums. However, with some research, many find affordable car insurance options online despite their low credit scores.
Why Check Credit?
While it may seem unusual, car insurance companies often use credit scores to determine premiums, as studies show that those with higher credit scores tend to file fewer claims. As a result, individuals with lower credit scores may face higher rates, fewer payment options, or even insurance denial.
Not All States
Some states, like California, Massachusetts, and Hawaii, prohibit car insurance companies from using credit scores to set rates, considering it unfair. However, in other states, understanding your credit score is crucial to anticipating insurance rates and options.
Credit Issues That Affect Insurance
The credit score seen by car insurance companies focuses on financial habits like timely payments, available credit, and bankruptcy history, rather than the consumer's general credit score. This tailored view helps insurers assess the likelihood of customers meeting their premium payments.
What Credit-Based Insurance Score Doesn’t Count
The FTC found that insurance models linking better credit to fewer claims work only when excluding personal factors like race, age, and income. Credit scores used by insurers are tailored for them and exclude such personal details, though other application sections may consider them.
Order Credit Report
Consumers can protect their credit by understanding their rights, including accessing a free annual credit report from agencies via platforms like AnnualCreditReport.com. Be cautious with services like Credit Karma or Wise Piggy, which offer free scores but may promote insurance or credit products.
Fix Issues On Reports
Consumers should carefully review their credit reports to ensure all details, such as addresses and accounts, are accurate. If errors are found, they have the right to dispute them with the credit reporting agency, which can help improve their credit score.
Improve Your Credit Score
Improving a low credit score takes time and effort but can be achieved by consistently paying bills on time, making more than minimum payments on credit cards, and managing credit responsibly. Avoid store-based credit cards, as they often come with high-interest rates.
Find Insurers Who Don’t Check Credit
If denied car insurance due to credit history, some companies offer policies without credit checks, though premiums are often higher. This option is still more affordable than facing fines or penalties for driving uninsured.
Focus On Controllable Factors
Credit history is just one factor in car insurance applications, as discounts may be available for students with good grades, steady employment, or organization memberships. If premiums seem unaffordable, customers can call their insurer to explore potential discounts and lower costs.
Call And Ask For Lower Rates
If you've been paying high car insurance rates due to a low credit score, it may be worth asking your insurer for a rate reduction after making improvements to your credit. If they’re unwilling to lower your rates, shopping around with other companies could help you find a better deal, as credit scores can be improved over time.
