Insurance companies use many factors to determine your auto insurance premium, and in most states, your credit score is one of them. Your credit insurance rating is not the same as your credit rating used by lenders when you apply for a credit card or loan. Insurers look at your financial management history to determine your insurance risk, such as whether you pay your bills on time and have ever been in collection or declared bankruptcy.
If you have a limited credit history or bad credit, you could pay higher insurance premiums than someone with great credit.
Why do insurance companies care about my credit rating?
Insurance companies base premiums and their decision to provide you with insurance coverage on the degree of risk you are insured. People with negative financial patterns – and usually bad credit – are considered a riskier person to insure, so the insurance company may offer coverage at a higher rate than a less risky person. Insurance companies use specific parts of your credit report to create your credit-based insurance score, including:
- Length of credit history
- New credit requests
- Outstanding Debt
- Late payments
Some states do not allow the use of credit as a factor in determining auto insurance premiums. California, Hawaii, Michigan, Massachusetts, and Washington do not allow insurance companies to take your credit score into account when determining your insurance premiums, but all other states do to some extent. measure your credit score when calculating rates.
What is the impact of credit on my insurance premiums?
The worse your credit history, the higher your insurance premiums can be. In the United States, the average cost of auto insurance is $ 1,674 per year for full coverage with good credit. Using the rates provided by Quadrant Information Services for full coverage annual premiums, drivers with excellent credit pay an average of $ 1,487 while a driver with average credit can pay $ 1,865 per year. For the average driver with poor credit, the rates are much higher at $ 3,873 per year for the same coverage.
|$ 3,873||$ 1,865||$ 1,674||$ 1,487|
What if i don’t have a credit history?
If you don’t have a credit history, you might have a hard time getting auto insurance and might pay more than the average driver. It’s still possible to get auto insurance without a credit history, but it can be more difficult. Fortunately, credit history is not the only criterion used by insurance companies to calculate auto insurance premiums. Personal information, location, and vehicle-related factors are also used to determine if you qualify for auto insurance when your credit check comes back without a history.
No credit check auto insurance
Outside of states that don’t allow credit checks (California, Hawaii, Michigan, Massachusetts, and Washington), you probably won’t find “no credit check” auto insurance companies. But, you have other options that can potentially help you get affordable auto insurance even if you have bad credit or a limited credit history.
One option is to consider telematics or usage-based auto insurance. Companies that offer usage-based programs use telematics devices to track your driving behaviors. Telematics can follow:
- Using the phone while driving
- Miles traveled
- Rapid acceleration
- Sudden braking
- Time of day driven
The safer and more responsible you are behind the wheel, the better your chances of getting cheaper auto insurance.
What other factors are used to determine auto insurance premiums?
In states that consider it, your credit score and history aren’t the only things considered when an insurance company sets your auto insurance premiums. In addition, they can take into account factors such as:
- Your postal code (except CA and MI)
- How old are you (excluding HI)
- Your driving and claim history
- How long have you been made redundant
- The make and model of the car you are driving
- The type of coverage you need
- Safety functions on your car
- How you buy insurance (in person, online, before your next renewal, etc.)
- Annual mileage
- Eligibility for rebate
- Vehicle ownership status
Pricing structures vary by insurance company, so which company you choose has an impact on your insurance costs as well.
How can I save money on my car insurance?
Auto insurance companies that don’t check credit are almost impossible to find in states that allow it. If you want to save money on your auto insurance, even in states that don’t require a credit check, consider these tips:
- Ask about discounts: Insurance companies offer a list of discounts. Make sure you take advantage of each you qualify for. Whether you’re renewing or shopping for new auto insurance, find out about the discounts the company offers.
- Avoid tickets and accidents: Maintaining a good driving record not only allows you to get the best rates, but also opens up more discount opportunities. The safe driving and accident-free reductions are intended for drivers without a ticket and responsible accidents. If you are involved in an at-fault accident, it could increase your fares and you could lose your good driving discounts.
- Increase deductibles: If you have full coverage, you may be able to save money by increasing your deductible. The deductible amount must be paid if you file a claim, so make sure you can pay it if you decide to increase your deductible.
- Compare the prices: Even when you offer the same coverage, you will likely get a different premium from each insurance company. You may be able to save money without sacrificing coverage by getting quotes from multiple companies. Compare quotes to get the best deal on the coverage you need.
Frequently Asked Questions
What are the best auto insurance companies for someone with bad credit?
The companies that are best suited for drivers with bad credit are those that specialize in high risk drivers. Some of the best auto insurance companies for someone with bad credit are Allstate, Direct Auto, and Progressive.
How do I know what my credit insurance score is?
Insurance companies use information from your credit report to create your credit-based insurance score. Companies use proprietary formulas to create your credit-based insurance score, which generally varies by company. While you may not be able to know your credit-based insurance score, you can download a free copy of your credit report to get the same information that insurance companies use at annualcreditreport.com.
How can I create credit?
You may be able to create credit by applying for and using credit cards responsibly. You can also apply for a personal loan, car loan, or mortgage and make your payment on time to help build a good credit profile.
Bankrate uses Quadrant Information Services to analyze 2021 rates for all zip codes and carriers in all 50 states and Washington, DC Rates shown are based on a 40 year old male and female driver with a clean driving record, credit and the following comprehensive coverage limits:
- $ 100,000 liability for bodily injury per person
- $ 300,000 in civil liability for bodily injury per accident
- Civil liability for property damage of $ 50,000 per accident
- $ 100,000 in bodily injury caused by an uninsured motorist per person
- $ 300,000 in uninsured bodily injury per accident to a motorist
- $ 500 collision deductible
- Global deductible of $ 500
To determine the minimum coverage limits, Bankrate used minimum coverage that meets the requirements of each state. Our basic profile drivers own a 2019 Toyota Camry, commute five days a week and cover 12,000 miles a year.
These are sample rates and should only be used for comparison purposes.
Credit: The rates have been calculated based on the following insurance credit levels assigned to our drivers: “poor, average, good (basic) and excellent”. Insurance credit levels take your official credit scores into account, but are not solely dependent on this variable. The following states do not allow credit to be a factor in determining auto insurance rates: California, Hawaii, Massachusetts, Michigan, Washington.