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How bad credit affects car insurance rates

Car insurance companies increase the rate of car insurance for people having bad credit. A history of bad credit does not boost the car loan cost. The insurance companies take this as one of the key factors before setting insurance rates. Thus, auto insurance for bad credit holders is high.

Most of the states follow this practice, except for Hawaii, California, and Massachusetts as they ban this practice. Insurers say data shows loads of connection relating the claims filing and credit history. Generally, people paying bills on time, file for lesser claims than people paying late.

Insurance companies are different from the lenders. They do give importance to score design. The credit score of a lender is based on the ability to repay a loan, while an insurance score that is credit-based predicts if you can file claims or not.

Insurance CompanyPoor Low Fair Good Excellent
State Farm $3,852 $3,108 $2,484 $2,004 $1,644
Allstate $5,400 $4,056 $3,432 $2,436 $2,088
Nationwide $10,320 $9,408 $7,356 $6,564 $5,796

How to Get Cheap Car Insurance with Bad Credit

How much does bad credit increase your car insurance rates?

A credit-based insurance score in some state influence rates and in such places auto insurance with bad credit may be severe.

Nationwide calculation shows that the average rate difference between good credit and fair showed 17 percent. The difference between good and poor credit revealed 67 percent. There is no doubt that auto insurance for people with bad credit is high relative to excellent and average credit that is half the amount of poor credit.

In addition, it also affects the down payment size of an insurance company and also the payment options offered. The credit score of a consumer may touch your car loans, mortgages, credit cards, and employment. The more you save with a better credit score and so monitoring the history of your credit helps in making smart financial decisions. Yet, if you have a poor credit history, check for the best auto insurance for bad credit.

Effect of credit on car insurance: Different Genders

For Male Credit score Risk score Car payment Insurance payment Total
740 or above 700 or 700+ $350 $73 $423
680-739 600-700 $393 $93 $486
550-619 599 and 599- $439 $96 $535
For Female Credit score Risk score Car payment Insurance payment Total
740 or 740+ 700 or 700+ $515 $88 $603
680-739 600-700 $531 $131 $662
550-619 599 and 599- $599 $197 $796

Does bankruptcy affect your car insurance rates?

Yes, the bankruptcy may affect the car insurance rates, but it is also based on the credit rating you had prior to bankruptcy. However, if you are paying your insurance on time then there is no bad credit auto insurance attached to you. However, a low credit rating may bring an insurance rate increase.

Any bankruptcy filing type is certain to hurt your credit rating and stays on the record for 10 years. By that time, car insurance companies use credit as risk assessment and may increase the rate or reduce offering the lowest rates. In case of post-bankruptcy you are shopping for a new policy, some companies deny offering a quote, as bankruptcy is considered a risk factor and so car insurance for people with bad credit is very difficult to get.

What helps and hurts your auto insurance score

The factors that are given importance by the insurance companies are based on a good credit insurance score and this means long credit history and timely payments. The typical negatives here include high debt level, short credit history, and definitely relates to auto insurance bad credit.

Your age, income, address, ethnicity, gender, and marital status also are a part of this score. The credit setting is controversial as it penalizes people having job losses or low incomes. In fact, these are the people who require cheap auto insurance. However, insurers argue that credit-based insurance helps them in setting accurate rates.

How to improve your car insurance score

You can always improve the score of your credit-based insurance and enjoy lower:

  • Pay bills on time and assure to keep your accounts in good stand. Avoid late payments and thus rule out the fact of car insurance for bad credit.
  • Keep the balances of your credit card low. The score of insurance considers the amount you owe. Avoid maxing the credit cards.
  • Do not open credit accounts unnecessarily. Open credit accounts only if you need them.
  • Maintain credit history as having little or no credit history will decrease your score and result in hindrance in receiving proper car insurance for bad credit rating.
  • Keep your credit report accurate. Keep credit reports ready and if there are any errors get it fixed soon.
  • Seek professional advice, if you are experiencing trouble in paying bills or ask for cheap auto insurance for bad credit.

With the improvement in credit, your car insurance rates decline. Consider comparing car insurance quotes if there is a positive trend in the scores.

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