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How Do Credit Scores Affect Insurance Prices?

By: Marilyn Katz Home | Finance

Many consumers are looking for the very cheapest car insurance. However, they are not aware that their poor credit scores can affect the way insurers view them as a risk.

If insurers view a consumer as a higher risk, they will only insure that person for a higher rate. They may even decline coverage. This may not seem fair at all.

Look at bad credit and auto insurance. One person may be a great driver. He or she may have operated a vehicle for several years with no accidents or traffic tickets. You would expect them to get the lowest auto insurance rates. However, if that person has some documented financial problems, companies have the right to consider them a higher risk. So they may never offer their best rates to somebody with a poor credit report!

Many critics think this is unfair. It puts a larger burden on people who are already struggling with money problems because they must pay more for coverage. This coverage will be required by the state in order to be a legal driver. It may also be required my a lender in order to keep an auto loan. In order to comply with these requirements, a person with challenged credit may also have to pay more for insurance!

But this is all totally legal. Insurers say they have conducted studies, and that people with poor credit tend to make more insurance clamis. They say they have the right to charge more in this case. Congress and state insurance boards have agreed with them. It may seem unfair, but the companies have won this case.

How can you find better rates if you have had financial problems? After all, in order to stay within a budget, it would be best to pay as little as possible for good coverage.

Of course, it is best to fix your bad credit. People with good credit have an easier time getting lots of things they want and need. Rates for all sorts of loans, including mortgages and auto loans, will be much lower. If you have a home repair or medical emergency, it will be a lot easier to handle it with great credit! But sometimes, it can take awhile to improve your finances. If you have budget issues, you probably need to get help right now.

Insurers are not all the same. There are insurers who still think a good driving history is important. These companies may also be willing to give you great discounts for other things. If you choose to drive a safer vehicle, establish a clean driving history, or take a driver's safety course, you can still find better prices. Sometimes you can bundle policies, like auto and home coverage, to get a break. Now is the time to figure out how to get lower premiums.

Insurance is regulated and priced by state, county, and zip code. So I cannot give you the name of one company that will be lower priced for people with credit problems. But you can use a free Internet based insurance quote form in order to compare rates in your home or office.

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Get help with bad credit car insurance so you can stick to a budget! Lower bills can also help you fix bad credit because you will be able to get your debt handled.

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