A low credit score will make it statistically more likely that you file an auto insurance claim. California, Hawaii, and Massachusetts are the only states that allow insurance companies credit scores to be used in calculating premiums. This means that most drivers’ credit scores have an impact on their car insurance premiums.
However, this does not mean that you should only shop for Colorado bad credit car insurance. It is still important to shop around for the best car insurance . However, this holds true for all.
Colorado’s best car insurance with poor credit
Colorado drivers with poor credit will pay $1,647 less for car insurance than the national average for good credit drivers ($1,674).
To determine if a driver will file a claim, insurance companies use a credit-tiering system. These are the categories:
- Poor
- Average
- Good
- Excellent
These categories may look very similar to those you get on your VantageScore or FICO credit scores. This is because all data comes from the same source: credit reports.
FICO and VantageScore generate credit scores for each individual by analysing information from your credit reports. Each person has three credit reports, which are obtained from the Big Three — Equifax TransUnion and Experian.
The insurance company may be looking at your credit score when it comes down to insurance. This could include a report from LexisNexis Risk Solutions, or FICO.
What is the difference between a credit score or a credit-based score on insurance?
Your credit score is used by financial institutions to assess your ability to repay debts. Your credit score is used by insurance companies to predict whether you will file a claim. Although the data they use is identical, the results are often different. An insurance company only uses the data to determine your premium cost. A financial institution will look at it and decide whether to approve or deny your credit request or loan application.
What does Colorado’s credit score have to do with my Colorado car insurance rates?
Numerous studies have shown a strong correlation between credit scores, insurance claims/ losses, and credit scores.
Although the ‘why’ of these two factors is not clear, many studies have shown a strong relationship. An FTC Report from 2007 refers to a MetLife study that found drivers with poor credit were at 50% higher risk of filing large auto claims, and 90% more likely to file large homeowners insurance claims. This is a huge amount of money from a business perspective.
There are many reasons to improve your credit score. However, it is important to remember that insurance premiums can be lowered if you have poor credit.
It is possible that your insurance company will not lower your premium if you have recently been placed in a new credit group. You may need to wait until you renew your car insurance policy to see any major changes. Most policies cover six months. Many drivers simply change providers. Insurance companies consider your most recent data when calculating your premium if you switch providers.
What are other factors that impact Colorado’s auto insurance rates?
Your credit score and insurance history are important factors that influence the real cost of car insurance. Your:
- Your location has a huge impact on the cost of your car insurance. You will be more likely than others to file a claim if you live in an area with many claims. Moving could help you save money on your insurance.
- Driving record: Your driving record can be kept for many years due to traffic violations such as speeding tickets and at-fault accidents. Do not be surprised if you get your premium raised if you have a Colorado DUI or other serious traffic offense.
- Type of vehicle: A more expensive car is more costly to insure as it costs more to fix and replace. It may be wise to choose a mid-range car with a high safety rating, if you have difficulty paying your insurance. A Honda Odyssey costs approximately $1,454 per year to insure, compared with $2,225 for a BMW 330i.
How to get Colorado car insurance at a low price with bad credit
To lower your insurance costs, you’ll want to raise your credit score. This can be achieved by paying off your debts and making timely payments. You can also get lower car insurance by:
- Increase your deductible: A higher deductible will reduce your monthly premium. There are many deductible options available from insurance companies. Make sure you choose the one that is most affordable and meets your coverage needs.
- Driving an older vehicle: It is more expensive to fix and replace a new car than it is to insure. To lower your premium, drive an older car that has a high safety rating. Purchase an older car you can pair with discounts such as daytime lights or dual airbags.
- Bundling: If your condo, apartment, or homeowners insurance needs include coverage for condominiums, apartments, and homeowners, it is almost always a good idea to keep the same company. You will receive a discount on both policies. The same applies if you have to insure more than one car. This discount is known as a customer loyalty discount and is worth looking into to reduce your annual and premium insurance costs.
- Shop around: Each company has its own pricing algorithm. This means that you will receive a different premium from each company. Companies may not consider credit scores as important as other factors, so it is important to shop around if you have low credit scores.
- Comparison discounts: While many companies offer similar discounts to their customers, the savings you get with each one will be different. Low credit drivers need to look for the best discounts in order to get the lowest premium.
FAQ
When I apply for insurance, will I be subject to a credit check?
Yes. However, insurance companies will use what’s called a soft credit test instead of a hard credit credit check. Although it still examines your credit report information, a soft credit check does not affect your credit score.
Which Colorado company offers the best car insurance to cover bad credit?
Because your credit score is just one of many factors that insurance companies consider when determining a premium, Colorado cheap car insurance for people with bad credit will differ for every driver.
What company offers insurance for drivers with poor credit in Colorado?
Bad credit car insurance in Colorado does not exist. Because a credit score alone will not determine whether you are eligible to be insured. However, it will affect how much you pay for your premium. You will need to shop around to get the best price and you will need steps to improve your score.
