4 Tips for Buying Auto Insurance with Bad Credit
To find the best policy for you, (1) dispute inaccuracies on your credit report, (2) research factors that affect auto insurance rates, and (3) negotiate with your provider.
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UPDATED: Oct 7, 2020
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- Insurance companies use many factors to determine the risk
- Your credit rating, driving history, and even the type of car you drive can affect your premiums
- Conducting online research before you buy car insurance can help you to save hundreds of dollars
Insurance companies often tell people the only policy they may qualify for an expensive one that covers drivers with bad credit. A consumer’s credit history will impact potential insurance buying and just how high a premium will be. However, there are things you can do to get the most affordable coverage.
Insurance companies use many factors to determine risk. Consumer credit rating is one factor. If your credit history is excellent, you are considered a better risk.
Consumers maintaining excellent credit histories are believed to be less likely to default on payments. Consumers with good credit are also believed to be less likely to experience accidents. Thus, they also are less likely to file claims.
Go ahead and enter your zip code above in the FREE search tool on this page to find affordable coverage now!
Improve Your Credit History
Practice self-discipline by discarding those high-interest credit cards. Insurance companies look to see if consumers pay bills on time. Keep to a budget that does not allow any spending beyond your income.
Not having credit can also be a problem, so apply for a credit card to build your credit history. No credit history makes a potential insured unknown to a provider. Once obtaining credit, use it regularly. Always pay your bills on time.
Check with the three major credit reporting agencies, Equifax, TransUnion, and Experian on an annual basis. Check the accuracy of each report. If you find any inaccuracies, you can dispute them with the reporting agency.
Consult with a professional credit repair service for assistance. Repairing your credit is a wise choice. Once your credit is repaired, ask your provider to re-evaluate you as a risk. Ask to be removed from the bad credit car insurance risk category. This will help lower premiums.
Often when time and effort improve a person’s credit rating, insurance providers will respond positively by offering the consumer for reduced policy rates.
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Conduct Online Research
Consumers possessing bad credit histories are a fact of life. Many insurance companies understand this. In fact, bad credit consumers offer a specific market many providers seek to attract. Many insurance companies cater to drivers with bad credit by offering specialty policies.
First, arm yourself with enough positive information about your present situation. One positive factor could be purchasing an older and cheaper vehicle to drive.
Additionally, if a consumer works and lives in a low-risk area, this adds in your favor. If you have assets beyond a job income, noting this can also help reduce your risk situation.
Search online for such bad credit insurance providers. Compare policies and prices getting three to five quotes. Also, consider an online service that will search for you once you input your personal information.
These services may help find a company in your area specializing in bad credit auto insurance.
Check to see if having coverage on multiple cars will help reduce monthly premiums. The main driver on the policy might be a bad credit risk. However, when combining drivers and cars on one policy, savings can be realized.
One thing that will help is when drivers who have bad credit prove they have a steady job. Having a steady job produces a steady paycheck. Many times an insurance provider can overlook a poor credit rating when their job history shows earnings that can pay premiums.
Check with Your Current Insurer
A bad credit history often only surfaces when a consumer starts looking to change providers. If you have a history with a particular provider, it might be beneficial to remain with that company.
However, often credit checks are conducted by insurance companies when a driver’s policy comes up for renewal.
This is why it is so very important to maintain an excellent record with your present insurer. This includes always making payments on time.
Consider setting up automatic insurance payments that may be available through your job.
Automatic payroll deductions can help an insured individual. When you develop an excellent payment history with an insurance company, they are more likely to work with you in tough times.
Try negotiating your monthly insurance premium. Way too often consumers automatically accept a proposed monthly premium. It is beneficial if an insured asks questions about how a premium is calculated.
Insurance companies sometimes do not do a credit check to determine rates. However, many other factors do impact rate structuring. Make sure you understand how your premium is calculated instead of merely accepting it.
Personal situations may override credit histories. Always inform your insurance company when personal particulars change in your favor. This could be a change of address to a lower risk area or, perhaps, changing where your vehicle is parked.
Consider adding safety devices to your automobile. Often, insurance companies provide a list of authorized safety and anti-theft devices. The one-time purchase fee may be a good investment. This investment could lead to overall policy premium reductions.
Check Your Coverage
Although you may be subject to increased premiums as bad credit risk, check your coverage. One of the best methods for reducing premiums is to increase your policy deductible. Some kinds of coverage may not be necessary.
Make sure your mandatory body liability coverage suits your specific personal financial situation. This type of coverage covers the driver and passengers of that other when involved in an accident. It protects your assets when sued
Bodily injury coverage will also protect passengers riding in your car, so even though you have a history as a careful driver, you still have to have bodily coverage.
This coverage needs to fit your needs. If you have little assets beyond a modest income, there is no need for high coverage. You should match coverage levels with your net worth. Find online net worth calculators to help you determine your coverage level needs.
For example, if you make about $35,000 annually and rent a home, electing $50,000/$100.000 coverage should be enough. But if you own a $150,000 home and have investments totaling more than $40,000, choose $100,000/$300,000 coverage.
Several factors will impact the cost of bodily liability coverage. These factors include your age, driving record, and marital status. Your cost for bodily liability coverage is also influenced by where you live.
When it comes to choosing property damage coverage, the state-mandated minimum may not work. This is usually $5,000. However, if you total someone’s Cadillac, this level of coverage will not suffice.
Find considerable savings reducing or eliminating Personal Injury Protection (PIP). This coverage pays medical (and funeral) costs regardless of who is at fault. Consumers with adequate health, income replacement, and another type of disability policies can skip this coverage.
The cost of car repairs after an accident can be paid through collision coverage. If your car is damaged due to natural elements such as hail, hurricane or other storm damage or possibly an earthquake, along with vandalism and theft, your repair costs are covered.
However, the choice of low deductibles will increase overall policy costs. Choose as high a deductible as possible. The purpose of insurance is protection against financial ruin. Additionally, when owning an older vehicle, this coverage should be deleted.
Keep in mind that collision and comprehensive coverage reflects approximately 40 percent of your premium paid.
These types of coverage are what are known as cash value protections. The amount of money paid out if the car has been totaled it is reflected in the Kelley Blue Book.
Regardless of your specific bad credit history, insurance companies do want your business. However, insurance agents receive commissions based upon the amount of money a consumer pays for a policy.
Therefore, many agents tend to convince potential customers about subscribing to add-on coverage that may not necessarily be in the consumer’s best interest. Make sure to take the time to thoroughly assess your financial situation, conduct the necessary research to find information to make a buying decision.
Use the FREE online tool found here by entering your zip code in the box below to find affordable coverage for drivers with a bad credit history!