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Is My Credit Affecting My Insurance Rates?

A tablet showing data about somebody's credit report to depict how credit scores affect insurance rates.

How Your Credit Score Impacts Your Car Insurance Premium

When the Federal Trade Commission (FTC) became aware that insurance companies were using a person’s credit score not to determine if they were more or less likely to pay their bill, but as an indicator of whether or not they were more likely to file a claim, they launched a study. This study (done in 2007) proclaimed that credit-based insurance scores are effective predictors of risk under car insurance policies.

The study also showed that African Americans and Hispanics are overly represented in consumers with lower scores. Today, many people feel that the use of credit scores in determining one’s eligibility for insurance and how much they pay is discriminatory and some states have outright banned the practice. States that have banned this practice include California, Hawaii, Maryland, Massachusetts, Michigan, Oregon and Utah. Other states have temporary bans and/or restrict how credit scores can be used in determining car insurance rates.

In many states, however, insurance companies are allowed to use your credit score as one of the factors to determine your car insurance rates. If you have poor credit – even through no fault of your own – your rates could be higher than someone who has good credit. However, there are some things you can do to find cheap car insurance or lower your current car insurance bill.

How Can I Find Cheap Auto Insurance with Poor Credit?

There are some tried and true methods for finding low-cost auto insurance. Keeping your finances healthy is one, but you can still find affordable car insurance if you shop around. Here are some tips:

Keep Your Financial House in Order

Obviously, keeping your financial house in order is vital in some states to getting the best rates possible on your car insurance.

Although sometimes it may be easier said than done, maintaining a clean credit history and displaying regularity in making your monthly payments on time can prove quite beneficial to you more often than not. If you have a low credit rating, then you should do everything in your power to improve it as much as you can as soon as possible. Of course, unexpected circumstances that are out of your control such as an illness, long-term unemployment, disability, and divorce can throw a good-sized wrench in your attempts to turn things around quickly. In most of those cases, you have to ride out the storm, which can unfortunately take a great deal longer than you’d like.

Never Skip Buying Car Insurance

One of life’s inconvenient, but necessary expenses if you drive a car, insurance isn’t something you can afford to skip or ignore…ever. The consequences of driving our streets and highways without it can be extremely harsh – whether you get pulled over by law enforcement or get involved in an accident while uninsured. It’s not a risk you should be willing to take. Getting caught driving without insurance will most likely result in you being labeled a high-risk driver – with corresponding high premiums.

Latinx female checking her credit score on the computer

Switch Insurance Carriers

It’s a well-known fact that switching insurance carriers is one of the fastest ways to save money on car insurance. So, shop around and compare auto insurance quotes. Just be sure you are comparing apples to apples.

Tweak Your Deductible

Your car insurance deductible is the amount you pay before the insurance company kicks in when you file a claim. If you can afford to raise your deductible (even from $500 to $1,000) you’ll be saving your insurance company some money and that typically results in a lower monthly premium. Just be sure you can afford your deductible. Remember, if something happens and you need to file a claim, your insurance company won’t start paying until you’ve paid your deductible.

Take Advantage of Every Car Insurance Discount

All insurance companies offer their customers discounts. Finding out which ones you qualify for is just a matter of speaking with your agent. Are you a good driver with no claims for 3-5 years? Have you recently taken a defensive driver course? Are you a current or former member of the U.S. Armed Forces? Will you be taking out multiple policies, such as for home insurance and car insurance? These are just the tip of the iceberg for policy discounts. Don’t leave money on the table when it comes to your car insurance discounts!

These are just a few of the ways you can lower your car insurance deductible – even with poor credit. Above all, don’t take your credit score lightly. It controls many aspects of your financial life…from your ability to purchase just about anything on credit, to being able to get your dream job, to getting a break on your car insurance.

How Can I Find Out My Credit Score?

You should make a habit of checking on your credit score. Federal law requires the three main credit reporting companies – Experian, TransUnion and Equifax – to make your credit reports available free of charge once a year. You can also sign up for any number of sites that will monitor your credit score. Some of these are free and some charge a fee. Keeping an eye on your credit score is also a good way to monitor your finances for ID theft.

The Consumer Financial Protection Bureau is a U.S. government agency that provides your free credit reports online, by calling (877) 322-8228 or by downloading and filling out the Annual Credit Report Request form and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Note: You won’t receive a credit score from these credit bureaus. You will receive a credit history so you can check for mistakes or improper listings.

Find Affordable Car Insurance Online Even With Bad Credit

While you may not be able to change your credit rating overnight, you can check to see if you’re getting the best rates on your car insurance. At Freeway Insurance, we are all about helping everyone find car insurance they can afford. Why not get a free car insurance quote today? You are also welcome to give us a call at (800) 777-5620 or stop by one of our convenient locations.

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