How To Get Affordable Car Insurance With Bad Credit History

October 27, 2021

Having a bad credit history or filing a bankruptcy seems like it should only affect the credit card offers you get in the mail or the loans you can take out at the bank. Many consumers, however, have found that a lower than ideal credit score can have ripple effects in your life. One of the places where credit scores affect customers unexpectedly is when they decide to purchase car insurance. However, with the help of some research, many individuals find affordable car insurance online.

10. Why Check Credit?

It may seem counterintuitive to check credit when buying car insurance, but statistical models have shown that people who have higher credit scores, showing that they can manage money efficiently, generally file fewer accident claims on their insurance. The vast majority of car insurance companies, therefore, look at credit scores to decide what rates to offer their customers. A lower credit score will often translate into a higher rate, fewer payment options, or an out-and-out denial of the insurance application.

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9. Not All States

A few states have decided that this practice is unfair. If a customer is applying for insurance in California, Massachusetts, or Hawaii, the insurance company should not pull their credit report, or use that report to determine what rate to offer them. For customers in all the other states, however, paying attention to their credit report is necessary to understand what kinds of rates they will qualify for when it comes to buying car insurance.

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8. Credit Issues That Affect Insurance

The credit score that a potential car insurance company sees isn’t the same as a consumer’s overall credit score. They tend to see a score more tightly focused on a customer’s financial history, such as their timely payments, their available and outstanding credit, and whether or not they’ve filed bankruptcy in the past. This gives the insurance company a good idea of whether or not the customer will meet their premium payments.

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7. What Credit-Based Insurance Score Doesn’t Count

The Fair Trade Commission (FTC) has determined that their statistical models, showing that customers with better credit filed fewer claims, only held up when factors like race, age, gender, income history, or any personal information. No personal information is considered when the insurance company sees the credit score that was developed just for them. This information may be requested in other portions of the application, and can affect scoring in other areas.

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6. Order Credit Report

One of the most important things consumers can do to protect their credit is to be aware of their rights. Consumers are entitled to a free annual report from any agency that maintains credit information on them. These can often be requested online at sites like AnnualCreditReport.com, but other sites like Credit Karma and Wise Piggy specialize in using free credit scores to entice consumers into various insurance and credit products. Proceed carefully.

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5. Fix Issues On Reports

Sometimes, mistakes happen. When a consumer orders their credit report, they should look over it carefully to make sure that the information is correct, from addresses where they’ve lived to accounts they’ve opened or closed. If information is incorrect, consumers have the right to follow up on the information and dispute it with the credit reporting agency. Getting false information removed from the credit report can help improve the overall credit score.

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4. Improve Your Credit Score

If a customer’s credit score is low because of their own previous money handling history, they may need to take some time to fix that. It’s not an immediate process, but it can be done. Consumers should focus on paying bills in a timely fashion, making more than the minimum payments on their credit cards when possible, and being responsible with the credit they maintain. Resist store based credit cards which historically have very high rates.

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3. Find Insurers Who Don’t Check Credit

If a consumer finds that they’re unable to get car insurance through traditional companies because of their credit history – remember, the company must tell the customer if they are denied because of credit – there are some car insurance companies which don’t check credit. It’s almost guaranteed that these premiums will be significantly higher than other companies, but the fees are still less than the tickets and fines that result from getting caught on the road without insurance.

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2. Focus On Controllable Factors

A customer’s credit history is just one factor in their car insurance application. Other factors like being a student with good grades, being a member of certain organizations, or having a steady job history can earn a customer discounts on their initial premium. If the company’s offer seems impossible, calling them to discuss whether a customer would qualify for any discounts to the premium may help make insurance more affordable.

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1. Call And Ask For Lower Rates

If you have been paying higher rates for car insurance for a while, and have been diligently working at improving your credit score, calling the car insurance company to ask for a rate reduction is a good idea. If the insurance company won’t budge, consider shopping around online to see if a better rate is available at a different company. A bad credit history isn’t forever, and can absolutely be repaired with work.

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