What car insurance companies do not use credit scores?
Unfortunately most car insurance companies use credit scores when analyzing your risk profile and those who do not usually have higher car insurance quotes as they specialize in car insurance for high risk drivers. However there is no mandatory rule requiring car insurance companies to use your credit score as part of the formula so if you have concerns about how your credit score may affect the cost of car insurance rates ask any potential car insurance companies if they look at your credit score before applying for a policy.
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How much does a bad credit score affect your car insurance rates?
This depends on a number of factors including which car insurance company is reviewing your application and your overall risk profile. Some car insurance companies will overlook a bad credit score with a clean driving record, others may assess a small additional premium for the higher risk while others might deny you coverage all together. While its not always possible to prevent negative marks on your credit report its important to try and maintain good credit as it not only can affect the cost of car insurance but also interest rates and eligibility for many financial programs such as credit cards, loans and more.
What is a bad credit score?
This is the $64 million question. Many experts agree anything under 620 is a bad credit score while others prefer to see scores over 660. Then there is the issue of what is on your credit report including collections, judgments etc. Credit scoring is not a perfect science and although car insurance companies do not use the typical credit score typical lending companies use they do use a very similar scoring scale called the Insurance Score which is issued by the same credit bureaus. Before applying for car insurance it’s a good decision to pull a copy of your credit report to see if there is any information you can correct. The upside is most consumers will never be affected by a credit score when applying for car insurance although there is always the possibility for those with bad credit.
Why are credit scores important?
This is a highly debated yet fair question as how you pay your credit card bills does not affect your driving ability. Even the best drivers in the world are surely late on a credit card payment every now and then. The defense from car insurance companies however is that its about risk of a driver filing a future claim and consumers with bad credit have been proven to have a higher risk of filing a claim. This may not mean they will file higher claims, just more claims. The reasoning could be due to limited access to credit drivers with poor credit have or the inability to pay for minor claims out of pocket. Whatever the reason it has been proven that people with bad credit do pose a higher risk and car insurance companies simply have to account for this risk. Some will charge a higher premium, others will overlook a bad credit score with compensating factors while a few will even deny coverage.
Who has the best car insurance for people with bad credit?
If you have seriously bad credit your car insurance options may be limited to high risk or no-credit check car insurance companies however the most important thing is never to assume you have such bad credit that a car insurance company will not insure you. Always speak with your preferred auto insurance companies no matter what your credit score is and shop around. Rates vary from one provider to another and even with a few blemishes you might be surprised that many of the major brands will still offer very affordable rates.
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