According to the Insurance Information Institute (III), , drivers with low credit scores are more likely to file large claims . This is why insurance companies charge more for policies. With the exception of California, Massachusetts, Hawaii, and Hawaii, all states allow insurance companies to use credit scores in determining premiums. New Yorkers’ credit scores have an impact on their insurance costs, regardless of whether they are aware.
New York’s best car insurance with poor credit
New Yorkers with poor credit pay on average $4,876 per year for car insurance. However, the national average is $1,674 for drivers with good credit, which is a difference in $3,202 annually.
Although it may seem like it is splitting hairs but it is not your credit score that impacts your insurance premium. It is your credit-based insurance score. The two are based on identical information from your credit reports, which were written by the Big Three, Equifax, and TransUnion.
This means information like on-time payments and debt, as well as the types of credit you have used will be used to calculate your insurance score. Your insurance score is a predictor of your claim-risk because your credit score will determine your creditworthiness.
These are the categories that they sort drivers into:
- Poor
- Average
- Good
- Excellent
One major difference is that while a poor credit rating can prevent you from getting loans or lines of credit, a low score on your insurance will not stop you from accessing anything. However, it may limit your ability to purchase certain policies beyond your means. Your insurance score will not determine if you are denied coverage. It will instead be due to a variety of factors such as too many DUIs and at-fault car accidents.
What does my credit have to do with my New York car insurance rates?
It is not difficult to see the link between low credit scores and higher claims frequency. But, that is only half of the story. This is the part that no one can answer. However, every decade or so similar studies reappear to arrive at the same conclusion. The 2000s were the most recent batch.
The Texas Department of Insurance published an in-depth study, followed by a supplement. Both studies concluded that credit scores were linked to claim occurrence. In 2007, the FTC also released its own study. The study found that drivers with low credit scores were 50% more likely to be a risk to the company than those with good credit. This was also true for homeowners insurance.
Good news: a driver with a good credit rating will see a decrease in their premium. Some drivers opt to switch providers instead, as insurance companies don’t usually review driver profiles until the policy renewal date. When you apply for a new company, they will look at the most recent information to calculate your premium.
How do other factors affect auto insurance rates in New York City?
Your insurance score is just one of many factors that affect the price of your premium. Your policy’s real cost usually boils down to these:
- Locality: Some zip codes can be more dangerous than others. It doesn’t matter if it is due to natural disasters, vandalism, theft, or accidents. Insurance companies will notice if drivers file a lot of claims in one area and charge them more for their car insurance. Although it’s not always practical, some drivers can save significant money by moving.
- Driving record: The biggest factor that could increase your premium is being labelled a high risk driver. Because you have a history of speeding tickets and at-fault car accidents, this can increase your premium. A DUI is the worst. A DUI can lead to a higher cost of car insurance in New York.
- Car: Some cars cost more to insure. A BMW 330i is $2,225 per year to insure. However, a Honda Odyssey costs only $1,454. You will save money on your premium if you switch to a mid-range car.
How to get New York car insurance at a low price with bad credit
Consider getting cheap New York car insurance for people with bad credit as two steps.
Phase one: The long-term strategy. These two factors will greatly help you in the long-term. If you drive a high-end vehicle, it is worth considering a pairing down to a low-range vehicle with a high safety rating.
Phase two: Short-game strategy. These strategies can be used immediately.
- Shopping around: Finding the best New York car insurance for people with bad credit is often as simple as shopping around. Why? The reason? Compare various providers. It will surprise you how many quotes can be given for the same type policy.
- Comparison of discounts: While many companies offer similar discounts, some companies can often beat their peers in terms of savings. When searching for the best discounts, be sure to compare both the discounts that you can get today and those you will be able work towards.
- Increase your deductible: You can lower your car insurance in New York for those with poor credit. High deductibles will reduce the monthly cost of car insurance but will also lower the amount you get after an accident. It is a good idea to consult an agent in order to determine the right deductible for your needs and budget.
Questions frequently asked
When I apply for insurance, will I be subject to a credit check?
Although you will need to pass a credit check in order to get New York car insurance for bad credit, this applies regardless of your credit score. It is not a hard credit check, which is the good news. Because you aren’t applying for any type of loan or line of credit, a soft credit check will not affect your credit score. Credit checks are only necessary when you are applying for financing.
What company would you recommend if your credit is not perfect?
Insurance companies are different from lenders in that you will not be denied service due to your insurance score. Look at customer satisfaction scores and average premium costs to determine the best insurance company .
