The Insurance Information Institute states that drivers with lower credit scores pay more for insurance as they are more likely than others to file a claim. California, Hawaii and Massachusetts allow insurance companies to use credit scores in pricing premiums. Washington is the exception.
Michigan drivers with low credit scores may be more expensive for car insurance than their peers. In some cases, even a lot more. In Michigan, drivers with poor credit score may pay 131% more to get full coverage car insurance than those with good credit. Based on Bankrate’s analysis of Quadrant Information Services’ quoted annual premiums, Michigan drivers with poor credit pay an average of 170% more for car insurance than drivers with good credit.
Michigan’s best car insurance with poor credit
Michigan drivers with bad credit score pay $6,209 per year on car insurance. However, this is about $3,900 less than the $2,309 state average for drivers with excellent credit. This difference is significant but it is important that you know that your rates may differ depending on your credit score.
Rates in Michigan could take into consideration information from your credit-based insurer report — an exclusive report to insurers that may include the same information in your credit reports issued through the Big Three — TransUnion Equifax, Experian.
Insurers may consider your credit rate one of the following classifications, depending on your past with money or debt:
- Poor
- Average
- Good
- Excellent
This is similar to the way you are labeled on your credit report by one of the major agencies. There is a difference. A low credit score could prevent you from getting loans or lines of credit. However, a low score on your insurance credit will only affect the cost of coverage depending on where you live and who you are.
What does my credit have to do with my Michigan car insurance rates?
Studies have proven that low credit scores are associated with higher claims. This has been proven by past and current studies, such as a Texas Department of Insurance study in 2004 or a Federal Trade Commision study 2007. Metlife’s study found that drivers with lower credit scores are 50% more likely to be sued. The risk for homeowners was higher when they had other types of insurance.
Many drivers will see a direct effect on their car insurance costs by improving their credit score or past. You may not see a change in your credit score immediately. The time for your policy renewal is usually when premiums are re-evaluated.
Your car insurance provider might not adjust your rates if your credit score improves. Drivers looking for a faster rate may opt to switch providers. A new provider will review your credit history and provide you with a rate quote.
You might want to reconsider switching if you’re receiving loyalty discounts. The loyalty discount will eventually expire, so it might be worth keeping. Talk to your provider about your options and determine the best option for you.
What are other factors that impact Michigan’s auto insurance rates?
Your credit score is not the only factor that will affect your Michigan car Insurance rates. These are the main factors that affect the cost of car coverage:
- Metro or state: Some ZIP codes have higher claims than others. Accidents, theft, or natural disasters can all result in higher claims. Drivers in Tampa, Florida pay $450 more than Orlando drivers.
- Vehicle Type: A BMW 330i is the most popular choice for full coverage car insurance. You may pay $2,225 per year on average. Full coverage for the Honda Odyssey is available at a rate of $1,454 per year. Michigan drivers will likely have a variety of rates depending on their vehicle selection.
- Driving record: A Michigan DUI conviction could result in a 11% or more increase in your premium. High insurance costs are often caused by DUIs or other high-risk factors.
How to get Michigan car insurance cheap with bad credit
Your credit score can help you get lower car insurance over the long-term. Although this is not an immediate step, it can help you save a lot of money over the long-term. You can review your credit report and correct any errors. You may be able dispute mistakes and see an improvement in your credit standing sooner.
You may be able to find Michigan cheap car insurance for people with bad credit. The chances of getting a lower premium will increase if you follow the below strategies:
- Compare rates: Not all companies penalize poor credit equally. Compare quotes from multiple insurance companies to find the one that offers you the best rate for the coverage you require.
- Compare discounts: Although many companies offer similar discounts to their customers, the actual savings amount will vary from one provider to another. You may need to speak with an agent to find out how much you can save and what best discount are.
- You can increase your deductible. Most companies offer several deductible options for specific coverages. This allows you to choose the one that is most suitable for your needs and budget. You will have to pay more for repairs after an accident if you raise your deductible. Talk with your agent about what options are available.
- Your driving record plays an important role in your premium, regardless of your credit score. Keep your premiums low by being accident- and claim-free. Many providers offer discounts for good driving, which can be quite easy.
Most Frequently Asked Questions
When I apply for insurance, will I be subject to a credit check?
It may affect your credit score, but it won’t necessarily harm it. This is because it is considered a soft check. If you’re looking to borrow money or obtain a line, a credit check will only impact your credit score. This is called a hard credit review.
What Michigan company provides the best auto insurance for people with bad credit?
Each driver’s individual circumstances will determine which policy is best for you. It is best to shop around as every company will weigh the importance of credit differently.
