If you’ve ever tried to buy car insurance with a bad credit score, you know it’s not the easiest thing in the world. Insurance companies often consider credit as a major factor when determining your premium rates, and unfortunately, those with poor credit tend to face higher premiums. But here’s the good news: it’s still possible to get affordable car insurance even with a low credit score. Let’s dive into how you can navigate this challenge and still save money on your car insurance.
Why Does Your Credit Score Affect Your Car Insurance Rates?
Before we get into the details, it’s important to understand why credit scores play such a big role in your car insurance rates. Insurance companies use something called a credit-based insurance score. This score takes into account not just your credit score but also factors like how often you make late payments, your total debt, and your history of bankruptcies. Research has shown that people with lower credit scores tend to file more claims, so insurers consider them to be a higher risk.
A high credit score generally means you’re more likely to pay your bills on time, so insurers tend to offer lower premiums to those who have a better financial track record. On the flip side, a bad credit score can indicate financial instability, and in turn, you may face higher rates.
How Much More Will You Pay with Bad Credit?
If you have bad credit, you might be wondering just how much more you’ll have to pay for car insurance. Unfortunately, the exact amount varies depending on your insurer, location, and how bad your credit is. On average, however, people with poor credit can expect to pay up to 50% more for their car insurance than those with good credit.
For example, let’s say you would normally pay $800 per year for car insurance if you had a great credit score. With a bad credit score, you could end up paying closer to $1,200 or more annually.
While that may seem like a steep increase, there are ways to bring those costs down. Let’s talk about some strategies to help you get cheap car insurance, even with bad credit.
Shop Around and Compare Rates
One of the easiest ways to find cheaper car insurance is to shop around. Not all insurance companies weigh your credit score the same way. Some insurers might focus more on your driving record or the type of car you drive, while others may place more emphasis on your credit history.
- Get Quotes from Multiple Insurers: Make sure to get quotes from at least three to five different companies. Some companies might offer special discounts for those with bad credit, so it’s worth exploring all of your options.
- Use Online Comparison Tools: There are plenty of online tools that allow you to compare rates from various insurers quickly. Websites like The Zebra, Compare.com, and Gabi can help you gather quotes in minutes.
The key here is not settling for the first quote you receive. By comparing rates, you can identify which insurance companies are more lenient on credit scores and offer competitive rates.
Consider Adjusting Your Coverage
If you’re struggling with high insurance premiums, another option is to adjust your coverage. While this won’t necessarily reduce your credit-based insurance score, it can help lower your monthly premiums.
- Raise Your Deductible: A higher deductible means you’ll pay more out of pocket if you have an accident, but it can significantly reduce your monthly premium. Just be sure that you can afford to pay the higher deductible if you need to file a claim.
- Reduce Unnecessary Coverage: If you’re driving an older car, for example, it might not make sense to pay for comprehensive or collision coverage. If the car’s value is low, you may be better off dropping those coverage types to save money.
- State Minimum Coverage: In some cases, you might only need the minimum required coverage by your state. While this won’t give you the best protection in the event of an accident, it can keep your premium costs low if you’re just trying to meet the legal requirements.
Take Advantage of Discounts
Even with bad credit, there are still ways to earn discounts on your car insurance. Insurers typically offer a variety of discounts based on factors other than credit scores. Here are some common ones you might qualify for:
- Safe Driver Discount: If you have a clean driving record, you might qualify for a safe driver discount. Avoid accidents and moving violations, and you can lower your rates over time.
- Low Mileage Discount: If you don’t drive much, you could qualify for a low-mileage discount. Insurance companies tend to view low-mileage drivers as lower risk because there’s less chance of an accident.
- Bundling Policies: Many insurance companies offer discounts if you bundle multiple policies, such as car and home insurance, together. This can be a great way to save money, especially if you need both types of coverage.
- Defensive Driving Course: Taking a defensive driving course could also help lower your rates. It shows the insurer that you are proactive about improving your driving skills, which can reduce your risk.
- Vehicle Safety Features: If your car has modern safety features, such as anti-theft devices, airbags, or a backup camera, you may be eligible for a discount.
When you speak to an insurance agent, make sure to ask about all available discounts. Sometimes, these can add up to significant savings.
Look for Specialized Insurers
Not all car insurance companies treat people with bad credit the same way. Some insurers specialize in covering high-risk drivers, and they may offer more competitive rates for people with poor credit scores. These companies tend to look at factors beyond credit to determine your rates, like:
- Driving history
- Location
- Car model
- Age and experience
- Vehicle usage (e.g., commuting vs. leisure driving)
For example, some insurers like The General or Progressive are known for working with people who have bad credit, and they may offer more reasonable rates than traditional insurers. It’s worth investigating these companies if you have trouble finding affordable coverage elsewhere.
Improving Your Credit Score
While you can still find cheap car insurance with bad credit, it’s important to work on improving your credit score over time. A better credit score will not only help you get lower car insurance premiums but also improve your chances of getting approved for credit cards, loans, and other financial products.
- Pay Your Bills On Time: The most important factor in your credit score is your payment history. Try to make all of your payments, including car loans, credit cards, and utilities, on time.
- Reduce Your Credit Card Balances: High credit card balances can hurt your score. Try to pay down your balances as quickly as possible and avoid maxing out your cards.
- Avoid Opening New Credit Accounts: Each time you apply for credit, a hard inquiry is made, which can temporarily lower your credit score. Limit new credit applications to prevent your score from dropping further.
- Check for Errors: Sometimes, your credit report may contain errors that can hurt your score. Review your credit reports regularly and dispute any inaccuracies you find.
Improving your credit score might take time, but as it improves, you’ll start to see lower rates on all your financial products, including car insurance.
Final Thoughts
Getting cheap car insurance with bad credit is possible, but it requires a bit of extra effort. Shopping around, adjusting your coverage, and looking for discounts can all help lower your premiums. While bad credit might initially result in higher insurance costs, it doesn’t mean you’re stuck with sky-high rates forever. By using these tips and focusing on improving your credit score, you’ll be on your way to finding more affordable insurance that works for you.
Whether you’re looking for a more budget-friendly policy or hoping to lower your premiums over time, remember that with the right approach, you can still save money and protect your car on the road.