The Insurance Information Institute states that drivers with lower credit scores pay more car insurance, because they tend to file more claims. Your credit score can have an impact on the price of your car insurance, except if you are located in California, Hawaii, or Massachusetts, where insurance companies cannot use it as a factor when calculating premiums.
Finding car insurance for people with poor credit in New Jersey can be difficult. Why? Your credit score is not the only factor that can affect your car insurance.
Car insurance with poor credit is the best in New Jersey
A New Jersey low credit driver pays on average $3,307 per year for full coverage car insurance. However, the national average of a good credit driver is $1,674. This is an increase of $1,633.
Contrary to what you might think, insurance companies don’t just look at your credit score. They also look at something very similar: your credit-based policy report. Your credit-based insurance score still depends on the information in your credit reports (compiled and analyzed by the Big Three — Experian Equifax, TransUnion).
Your money history (e.g., on-time or late payments, debt amount, credit types used, etc.) will determine your status. You can be either:
- Poor
- Average
- Good
- Excellent
A credit score or credit-based score is a simple distinction. While a poor credit score may prevent you from borrowing money, a low credit score will allow you to get coverage. However, it will increase your premium.
What does my credit have to do with my New Jersey car insurance rates?
It isn’t clear why people with low insurance scores are more likely to be in an accident. However, many studies have demonstrated a correlation.
The Texas Department of Insurance published an extensive study in 2004 and 2005. It also released a supplement to the study that showed drivers with lower credit scores file more claims. The same was done by the FTC in 2007. MetLife’s study is cited in the FTC report. It found that low credit drivers were 50% more likely to cause problems for the company than other types of insurance.
Drivers with poor credit scores are best to improve their premiums by improving their credit scores. They may also want to change providers once they have done this. The majority of policies have a 6-month term, so you might need to wait until your provider reviews your data again. Your new provider will work with the most current data if you switch.
How do other factors affect auto insurance rates in New Jersey
The real cost of insurance comes down to many factors that are not related to your credit score. These are the most likely culprits:
- Your zip code will determine how much of your premium you pay. Some areas have more claims than others. You can save money by moving to a safer area. In Florida, for example, you could save $450 per year if you moved from Tampa to Orlanda.
- Car: Insuring a high-end vehicle will cost you more than an average car. Your premium will go up if you drive an older car that has a high safety rating. One prime example is a driver who switches from a BMW 330i or a Honda Odyssey to insure their car. A Honda Odyssey costs only $1,454 per year, while a BMW 330i will cost you $2,225 per year. You could save $771 by simply changing your car.
- Your driving record High-risk factors can have a significant impact on the price of your car insurance. Your premium will likely be higher if you have a lot of traffic violations. A single DUI in New Jersey, for example, can raise your premium up to 120%.
How to get New Jersey car insurance at a low price with bad credit
A low credit score can affect how much car insurance costs. The best things you can do is to improve your credit and obey all traffic laws. There are ways you can save money on car insurance today. You may need to do some research to find the best car insurance for people with bad credit in New Jersey.
- You should shop around for rates: This is the best way to lower your premium. Every provider will charge you the same amount to cover a policy, even if you have low credit scores. Every company will weigh the importance of low credit scores differently. It is possible to save significant money simply by switching providers, even though it is not guaranteed.
- Compare Discounts: Car insurance for people with bad credit often offers discounts. You will save more if you go with one company than another, even if they offer the same discount. While shopping around, make sure you look for discounts you can both use immediately and those you can save on in the future.
- Your deductible can be increased or decreased. You will pay less in monthly premiums if you increase it. Keep in mind, however, that the more you raise it the less you’ll get after an accident. Talk to an agent about the best deductible for you.
Questions frequently asked
When I apply for insurance, will I be subject to a credit check?
Contrary to popular opinion, it won’t hurt your credit score. A credit check will only affect your credit score if there is money to be had, whether it’s a loan or a line of credit. Soft credit checks are more popular than hard credit checks. If you want to maintain your credit score, you will need a soft credit test.
What company provides the best car insurance for people with bad credit in New Jersey?
The best car insurer may not be right for everyone. This is because credit scores are only one of many factors that affect your premium. Compare rates and discounts to find the best car insurance.
