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Do I need good credit to get car insurance?

The lowdown...
  • In general, almost all car insurance companies use your credit score as a factor in determining your rate
  • The reason that car insurance companies consider your credit score is that they have determined that a lower credit score means you will be less likely to make your premium payments
  • If you take steps to improve your credit score, this is generally an effective way to decrease the rate that you will pay for car insurance in the future
  • You may want to get a copy of your credit report from the major reporting bureaus so that you can check it for any mistakes and correct them quickly
  • If you are able to improve your credit score, you should consider reapplying for car insurance through other car insurance companies because you may be eligible to get a much lower premium

The good news is that even if your credit score is lower than you would like it to be, you can still get car insurance. The bad news is that you will probably have to pay quite a bit more for it.

Your credit score is just one of the many factors that influence your premium, but it is a major consideration for most car insurance companies.

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Your Credit Score and the Price You Pay for Car Insurance

 

One of the reasons that the car insurance companies look at your credit score is that it is an indicator of your financial responsibility, which translates to how likely you are going to make your premium payments on time.

If you have a lower credit score, you may pay more for your car insurance, but it is still possible to get insured.

If you are worried about what your credit score looks like right now, then you should order a report of your credit report. You are legally entitled to one free credit report per year from the three major credit reporting agencies — Experian, Equifax, and TransUnion.

If you find out that your credit score is low, then you should take steps to improve it, such as minimizing your credit card debt and taking care of any overdue payments as quickly as possible.

Keep in mind that your credit score is not really about the amount of money you make. It has more to do with you paying off your bills on time and how well you manage your money and financial obligations.

Along with your credit score, car insurance companies also look at your driving record to determine your premium. If you have an accident-free driving record and have not received any tickets for moving violations, then this could work in your favor for getting a better insurance rate.

What to Do If You Have Trouble Finding Car Insurance

If you have called around to various car insurance companies and still cannot get approved for insurance, then you may need to check with your state agency.

Just because you have trouble getting approved for insurance through car insurance companies does not mean that you are excused from your legal obligation to maintain car insurance on any vehicles you own.

One of the ways that auto insurance is available to drivers with bad credit is through a risk pool of insurance. These are called state assigned risk pools in which insurers in that particular state are required to provide coverage to the drivers who pay a premium into the pool.

Your state department of insurance is the best source of information for this arrangement in your state.

Another alternative is that some auto insurance companies specialize in providing insurance policies to high-risk drivers. In addition to people with low credit scores, this could include drivers with poor driving records or those who have an exotic or luxury vehicle to insure.

Any type of driver who deviates from the average policyholder is going to have to pay more than average for a car insurance policy.

If you do manage to improve your credit score, make sure to make a phone call to other auto insurance companies to see if your rate has improved. If so, you can cancel your current coverage and sign up for a lower cost policy right away. Make sure that you do not have a lapse in coverage.

The Last Word on Credit and Getting Car Insurance

 

Even if you do not have a great credit score, you can still get insured by car insurance companies. In fact, it is your legal obligation to seek out insurance if you are going to drive on a public road.

You might have to pay a bit more for your premium if you do not have good credit, but you should check into another car insurance estimate once you have improved your credit score.

When you do not have a great credit score, it is even more important that you call around and get various quotes from auto insurance companies for a reasonable rate.

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