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How Can You Find Affordable Auto Insurance When You Have Bad Credit?

If you have bad credit and you've been shopping for car insurance, you may have wondered why the rates you've been quoted are so high. Unless you live in one of the three states where it's illegal (California, Hawaii, and Massachusetts), the vast majority of insurers take your credit history into account when determining your rates. In fact, it can sometimes have a greater effect on your premiums than a poor driving record.

People with bad credit tend to cost auto insurers more money—when you're maxed out on your credit cards, you're more likely to file claims for small incidents compared to someone who can simply put a mechanic's fee on his or her card. Insurers set their prices accordingly. However, it's still possible to find affordable auto insurance when you have bad credit. Read on for what you need to do.

Look for No-Credit Check Insurers First

Some smaller auto insurance companies don't check credit when they're quoting you a rate. If you have a good driving record but bad credit, you may find that these companies will give you better prices compared to larger insurers. However, it's not a guarantee—sometimes these insurers will simply assume that everyone has terrible credit and price accordingly.

The reason why you seek out quotes from these insurers first is to avoid having multiple hard inquiries on your credit report, as this will slightly lower your credit score. While uncommon, some insurers use hard inquiries to find out your credit history—there's no risk if the insurer doesn't care at about your credit history at all. If your credit score is already causing you problems trying to find affordable auto insurance, you don't want to lower it any further.

Get Quotes From Multiple Insurers to Find One That Doesn't Weigh Credit Score Heavily

Auto insurance companies have varying models for how they calculate risk. Some may weigh your driving record more heavily than your credit score or may use your age as the main factor when determining rates. Because of this variation, it's a good idea to shop around with multiple insurance companies (even the smaller ones) in order to find one that doesn't heavily weigh your credit history.

Work on Improving Your Credit Score and Keep Shopping for Auto Insurance

While it can take quite a bit of time to improve your credit history, every small increase in your credit score will help lower your rates. As your credit score improves, you should shop for auto insurance again every year to see how your rates have changed. You may be able to save a significant amount of money by switching.

It's rare for auto insurance companies to outright deny people with a poor credit history, but it can certainly complicate the process of shopping for insurance. Check the insurers that don't pull your credit history first. If the premiums are still too high for your liking, keep shopping around, work on improving your credit score and seek out new quotes every year as it rises.

For more information about car insurance, contact a company like Illinois Insurance Center Inc.