As an insurance agent, I see firsthand how having bad credit impacts prices. Fortunately, there are ways to get a good insurance rate without good credit.
Shop Different Companies
If you are a first-time insurance buyer with bad credit, it is very important that you shop your rates with different companies to make sure you are getting the best deal. All insurance companies take different things into account when calculating your insurance score. Some companies give credit scores more weight than other companies do.
I represent several insurance companies, and at times I am amazed at the price differential between them. It all has to do with the varying ways that they calculate their insurance scores.
Drive a Paid-Off Vehicle
If you have a car loan, then you are required to carry “full coverage” on your auto insurance policy. If your vehicle is paid off, then you can choose to only carry liability coverage. Liability-only policies are always significantly cheaper than those with full coverage.
If you must carry full coverage, then talk to your agent about raising your deductibles. Higher deductibles mean lower prices.
Do Not Let Your Policy Lapse
If you have poor credit, chances are that you are already paying more for insurance than a person with good credit. If you fail to pay your insurance bills and let your policy lapse, your rates will increase even more. A lapse in coverage can also cost you money with the DMV. Prevent lapses in coverage by always paying your bills on time.
Policyholders with good credit can afford a claim or two on their insurance policies. Those with less than stellar credit, however, should think twice before filing a claim. If you are in an accident, get an estimate on repairs before filing a claim. I often advise my clients to make repairs themselves if they can afford to do so. Claims coupled with a low credit score can make for a high monthly insurance bill.
Find a Good Insurance Agent
Your insurance agent can help you get a good rate in spite of your bad credit. A smart agent can recommend dropping certain policy coverages, or can even rewrite your policy to save you money. Your agent can also help you avoid a policy lapse by notifying you of your last day to pay. I spend a significant part of my workday reminding people to pay their bills, and rewriting policies for better rates. Remember: Your insurance is only as good as your agent is.