As society becomes more and more dependent on credit, be it to make purchases or other financial decisions, building and maintaining a good credit score has become arguably one of the most important things an adult can do. Your credit score extends far beyond your credit card and can determine the loans you get, the premiums you pay, sometimes even the jobs you’re hired for. When you boil it down, your credit score can tell the world how reliable you may be when it comes to finances, so those who extend themselves beyond their means tend to end up with lower credit scores.
That being said, when looking for car insurance, which is already a game of “low risk equals high reward,” one might find a not-so-great credit score gets in their way. Data from the Federal TradeCommission shows drivers with poor credit file substantially more claims than drivers with excellent credit do. More claims filed means more cash the company has to dish, and more cash dished means higher premiums.In fact, on average, drivers with poor credit pay about$100 more per month thandrivers with excellent credit scores. So, what’s a person with poor credit to do when on the hunt for car insurance? Not to worry: if you can’t raise your credit score, you can lower your car insurance.
Here are 5 ways to lower your car insurance if you have a bad credit score:
1. Look for a no-credit-check insurance company. While unfortunately there are only a few, it is possible to find an insurer who doesn’t look at your credit score. Good news for Hawaiians, Californians, and Bay Staters: you’re in the clear. State legislation ruled credit score evaluation as discriminatory against low-income drivers. For the rest, consider telematics and/or usage-based car insurance, where, rather than making broad assumptions based on demographics to produce premiums, an individual’s premium is calculated based on their actual performance, tracked by an in-car device or a mobile app.
2. Ask for discounts.Don’t be afraid to be discount savvy, and use special offers to your advantage. Lots of insurance companies offer military discounts, or even good student discounts. You can also be clever and bundle with family members (perhaps who have better credit scores!) and receive multi-policy or multi-vehicle discounts. Keep in mind: not all discounts are automatic. You might have to seek them out and ask for them.
3. Maintain a clean driving record. Unlike your credit score, there is absolutely no skating by your driving record when it comes to finding car insurance. Every insurance company wants to know your history of accidents or serious traffic violations. This is one of the most important components being factored into your premium so, if you’ve got a below average credit score, make sure your driving record is squeaky clean!
4. Downgrade to a cheaper car.Did you know that certain cars like sports or muscle cars, and luxury cars cost more to insure? Basically, any car with a large-and-in-charge engine underneath the hood, plus loads of cutting edge technology and luxury finishes is going to jack up your premium. Insurers always factor in the price of the car when calculating a premium because they will be on the hook for the repair costs or even replacement should the car get damaged. On the flip side, if you drive a car with advanced safety features, like a Subaru, is considered pretty “bare bones” like a Jeep, or is stereotypically a family car like a minivan, then insurers typically make assumptions that you’ll drive slower and safer, and offer a lower premium.
5. Compare insurance companies. As always: do your research! Lots of it. Use a comparison engine to help filter the seemingly endless options and lists upon lists of insurance companies vying for your money. When making an important decision like finding the best car insurance for you, be sure to take your time and make sure you are as informed as possible by comparing and contrasting plenty of options.
Of course, in addition to this list, you can always take steps to improve your credit score. There are plenty of ways to recover from an undesirable credit score like paying your bills on time, working to become debt-free, and avoiding opening any new credit cards. Do your best, and don’t lose hope! There are indeed opportunities for someone with a low credit score to score low car insurance premiums, if only you take your time, do some digging, and hold yourself accountable to safe driving and mindful spending. There is a plan out there for every person, no matter who you are- you will make it work!