Car Insurance with Bad Credit: What You Need to Know
Bad credit can affect your insurance rates, but there are ways to find affordable coverage.
If you have bad credit, you may have noticed that car insurance quotes can be surprisingly high. Many insurance companies use credit-based insurance scores as a factor in determining your premiums. While this might seem unfair, understanding how it works can help you find ways to save.
This guide explains the relationship between credit and insurance, and provides practical tips for finding affordable coverage even with a low credit score.
How Credit Affects Your Insurance Rates
Insurance companies use a credit-based insurance score (different from your regular credit score) to help predict the likelihood of a claim. Studies have shown a statistical correlation between credit history and insurance claims. As a result, drivers with lower credit scores often pay higher premiums. The impact varies by state — some states have limited or banned this practice — but in most areas, credit is a significant factor in your rate.
5 Ways to Save on Insurance with Bad Credit
Shop Around Extensively
Different insurance companies weigh credit differently. Get quotes from at least 5-6 companies, including both large national insurers and local agencies. The difference between the highest and lowest quote can be hundreds of dollars per year.
Ask About Discounts
Many insurers offer discounts that can offset the impact of bad credit — safe driver discounts, bundling discounts, low mileage discounts, and discounts for paying in full or setting up autopay.
Consider Higher Deductibles
Raising your deductible from $500 to $1,000 can significantly lower your monthly premium. Just make sure you could cover the higher deductible if you needed to make a claim.
Maintain Continuous Coverage
A gap in insurance coverage can increase your rates even further. Always maintain at least minimum coverage, even if you're between vehicles. This shows insurers you're a responsible, lower-risk customer.
Work on Improving Your Credit
As your credit improves, your insurance rates should decrease at renewal time. Making on-time payments on your car loan and other bills will help. Ask your insurer to re-run your credit at renewal to get the updated rate.
Understanding Coverage Requirements
When financing a vehicle, you'll typically need full coverage insurance (comprehensive and collision) in addition to the state-required liability minimums. This protects both you and the lender. At Whipz, we can help connect you with insurance providers who work with all credit levels to find coverage that meets requirements at an affordable price.
Frequently Asked Questions
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