Auto insurance could be expensive and gets determined by several varying factors. Factors employed in calculating auto insurance differ from state to state. Among the top considerations for setting auto policy rates is drivers’ credit rating.
In the US, Massachusetts, California, and Hawaii are the only states that prohibit credit rating for insurance premiums. So, if you drive a vehicle and have bad credit outside these three states, you’ve got to keep reading.
The dynamics used in calculating insurance premiums make several auto plans costly, even with good credit and discounts. But when a driver has bad credit, an insurance cover could be challenging.
Several insurance companies won’t consider offering a policy, and the ones who do, at an insane price.
That’s why in this piece, we’ll get to see bad credit insurance policies from several angles. There’ll be facts on how credit scores affect auto insurance rates.
Also, relevant advice and general info to help you make an excellent choice are right here. After reading through this, charting the best course for bad-credit auto insurance is a sure breeze.
How your credit score impacts your car insurance rates
Many policy providers regard bad credit drivers as more likely to file for claims. But that’s not the whole story. There’re several factors put into consideration before a policy provider decides to offer a trumped auto insurance plan.
But first off, policy providers run a credit check on new registrants before offering a policy.
What to do if your car insurance credit scores are low
No-credit-check auto insurance
Opting for no-credit-check auto insurance could be the best course for some bad credit drivers. But in some cases, drivers may end up spending more than expected for this type of plan.
And no-credit-check insurance is also hard to find. According to FICO, over 90% of insurers don’t offer no-credit-check policies.
Use-based insurance policy
In place of checking your credit score, some companies employ telematics in getting drivers’ usage frequency. Such data makes it easy for policy providers to fashion a policy around how much you use your vehicle.
Several established and new companies offer usage-based policies regardless of your credit score.
Why do insurance companies use credit scores?
Insurance companies use credit scores because it correlates with the likelihood of a driver filing for claims.
Many drivers with poor credit are less likely to foot out-of-pocket expenses in the case of a severe accident. Such factors make several insurance providers bear the brunt. Hence, there’s a focus on great credit before issuing a driver an insurance policy.
Drivers with excellent credit get lower premiums, while bad credit drivers will have to pay more.
Best bad credit car insurance companies
A lot of drivers believe the best car insurance for bad credit is only available from the cheapest policy provider. In most cases, this stands true. But sometimes, large firms offer great deals for bad credit and other high-risk drivers.
That’s why it’s essential to check out top firms that offer the best car insurance for bad credit.
| Policy Provider | Location | Policy Type | |
|---|---|---|---|
| 1 | Alliance United | California | Nonstandard auto policy for high-risk motorists |
| 2 | Allstate* | Several states | Usage-based auto policies |
| 3 | American Family | Oregon | Discounted policy for bad credit drivers |
| 4 | Dairyland | Several states | Nonstandard auto policy for high-risk motorists |
| 5 | Direct Auto | Several states | Nonstandard auto policy for high-risk motorists |
| 6 | Farmers | Illinois | Discounted policies for bad credit drivers |
| 7 | GAINSCO | Several states | Nonstandard auto policy for high-risk motorists |
| 8 | Infinity | Several states | Nonstandard auto policy for high-risk motorists |
| 9 | Progressive* | Several states | Usage-based auto policies |
| 10 | SafeAuto | Several states | Nonstandard auto policy for high-risk motorists |
| 11 | State Farm | Several states | Usage-based auto policies |
| 12 | United Auto | Several states | Nonstandard auto policy for high-risk motorists |
| 13 | USAA | Several states | Discounted policies for military families only |
*Auto policies evolve. The best way to get a deal for bad credit car insurance is to request cheap policies before registration.
Also, several insurers offer nonstandard policies in localized settings, giving drivers limited insurance cover.
How to improve your credit score
Improving your credit score could seem like an uphill task without the right info. But with access to top facts, it becomes more comfortable to get an improved credit score. And a lesser credit score attracts a friendlier auto insurance premium.
Follow these steps to improve your credit score without hassle;
Sustain low credit use ratio
Maintaining use of 30% of your available credit or less will improve your credit score over time. Policy providers take your credit history into account. So when drivers spend less than their quota, they get regarded as reliable customers.
And policy providers rank customers with reliable credit as less likely to request for frequent claims. Such status results in a lower premium rate when it’s time for a policy renewal.
Keep payments prompt and maintain credit within your budget
Ensuring your premium payments get settled quickly is another way to enhance your credit rating.
When you rapidly settle off outstanding credit payments, your reliability index increases several notches. And many insurance companies consider your timely payments as a significant factor in reducing or increasing your premiums.
Also, if you can’t pay for a loan without difficulty, there’s no need to get such a loan in the first place. Ensure you take a loan within your budget and prevent the credit payment from exceeding its due date.
Don’t make part payments
If you need to use credit in a month, ensure the full payment doesn’t exceed that month. Paying off stuff before interest accrues makes it easier to avoid getting a bad credit rating.
Use a secured credit card
Getting a secured card offers an excellent, albeit unconventional course to boost your credit score.
