Car insurance rates can be complicated and depend on many factors. Your credit score is used in rating factors in most states. According to data from Quadrant Information Services, drivers with poor credit pay on average 103% more for auto insurance than those with good credit. You could be charged more if you don’t have a good credit rating.
Understanding how your credit impacts your car insurance premium, what companies are best for drivers with low credit scores and what steps you can take to lower your premium might help you feel more in control of your car insurance.
Car insurance with the best rates for people with bad credit
Laura Adams, an insurance expert, says that drivers who have poor credit or average credit will pay more for auto insurance than those with excellent credit. The state you live in and your insurer will determine how much you pay.
There is overlap between high-risk drivers and those with bad credit in the world of auto insurance. Statistically speaking, drivers with low credit are more likely to file claims, meaning that they are a greater risk for an insurance company. As a result, many of the best auto insurance companies for bad credit drivers are the same as those for high-risk drivers.
- Dairyland: Specializes in high-risk drivers
- Direct Auto: Specializes in high-risk drivers
- Progressive: Provides insurance for high-risk drivers
- Allstate: Provides insurance for high-risk drivers
Car insurance for people with poor credit
While most car insurance companies will consider your credit score when pricing your policy they do so differently. Most drivers recommend getting quotes to compare rates and coverages. However, if you have a low credit score, it can make the process even more difficult.
Based on our research, the companies below (chosen based on market share) are some of the cheapest providers for drivers with bad credit. These companies are highly rated by J.D. for their customer satisfaction. Power. These companies offer discounts that could help lower your premium.
Your credit score and car insurance rates
When a new customer signs up for auto insurance, they usually conduct a credit check. Statistics show that drivers with lower credit scores are more likely to file insurance claims. This could lead to higher premiums for the company. Most insurance companies in the majority of states will charge higher rates to drivers with lower credit scores, in order to compensate for this added risk. The insurance premium will be lower if your credit score is higher than average.
California, Hawaii and Massachusetts are the only states that do not currently use credit as a rating component. Washington is a recent addition to this list, placing a three-year ban on the use of credit as a rating factor for auto, home and renters insurance. This does not mean that every driver in these states will have to pay the same amount of car insurance. Rates depend on many factors such as your driving record, state insurance laws and car type. Premiums can still differ between drivers because every driver is different. Credit is not used to rate policies.
State-specific auto insurance rates for people with bad credit
Insurance can be expensive for drivers with bad credit or good credit. Your credit score will most likely affect your premium, unless you are located in California, Hawaii or Massachusetts, Michigan, Michigan, Michigan, or Washington. Drivers with poor credit may pay twice as much for the same coverage in some states than drivers with good credit.
What is no credit-check auto insurance?
Auto insurance companies often use credit checks to determine customer rates. Some companies offer no credit-check auto insurance. These insurance policies do not take into account your credit score in order to determine your rate.
If you are looking for an auto insurance company that does not require a credit check, it is important to compare the rates of several companies. Premiums can be more expensive than those offered by standard companies. These no-check plans are more expensive because the company is trying to create a buffer against financial risk. While some customers may pay more than with a credit check, others will pay less.
How to improve credit scores
If you are trying to improve your credit score, there are a few guidelines that could make the process smoother. While it may take some time for your credit score to improve, there are many ways you can improve your financial health.
- Pay your bills on time. Late payments or failure to pay on time are two of the most damaging things that you can do for your credit. It is a great way to improve your credit score.
- Never pay less than the minimum amount. It is better to make less than the minimum payment than not paying at all. However, it will still cause your account to be in arrears until the full payment has been made.
- Be smart about how you use credit and debt. When you apply for loans or credit cards, be careful. You might want to cancel the loan or credit card if the minimum payments are beyond your means.
- Keep your credit utilization rate low. Your lender will appreciate how much of your total credit you have available. For maximizing your credit score and growth, it is best to use 30% of your credit.
- Pay your monthly credit card bill. Pay it off each month by using credit monthly. This will allow you to improve your credit score at a minimal cost. Also, paying off debt immediately can prevent most interest accrual.
There are other ways to save money on your car insurance
Beyond improving your credit score, there are other ways to save on car insurance. Here are some common ways to save:
- You can take advantage of discounts: Many car insurance companies offer discounts that could help lower your premium. Bundling your auto and home, renters or condo insurance is one of the most common discounts available.
- You can increase your deductibles if you have full coverage. You can increase one or both of these to lower your premium. However, you will have to pay more if there is a claim for vehicle damage.
- Compare quotes: Each insurance company has its own rating system. This means that the cost of the same coverage may vary among providers. Comparing multiple quotes may help you to find a lower rate.
- Be sure to review your coverage. Skipping on coverage can lead to more expensive repairs and higher costs if you are in an accident. It can be helpful to review your policy and make sure that you only pay for the coverages you require. You may not need certain optional coverages.
Questions frequently asked
My credit score will improve and my car insurance will go down.
Your premium might be reduced if your credit score has increased since you purchased a policy. Your renewal is the best time to see a reduction in your premium, since this is when your credit score might be re-evaluated by your company. If you’ve seen significant improvements in your credit scores and don’t want to wait until your renewal, your insurance company might be willing to reevaluate your credit. You might be able to see a reduction in your premium if your insurance company is able to do this and your credit score has improved.
How does applying for insurance affect credit?
Your credit score is not affected by filling out an application or getting an insurance quote. Your credit information is pulled by insurers using a “soft inquiry.” This is different to the “hard inquiry” when you apply for a loan. While hard inquiries can impact your credit, soft inquiries are not. Soft inquiries look at your credit information but do not affect it.
What can I do to negotiate a lower rate with my company?
You cannot negotiate car insurance rates. If you are working to improve your credit score, you may think that alerting your car insurance company to your efforts might result in a lower premium, but car insurance rates are not negotiable. Your premium may be reduced by improving your credit score. However, rates will not likely change until you have actually made any changes to your credit score.
