How To Get Car Insurance with Bad Credit

Having bad credit, regardless of the reason, is a difficult financial situation to be in. Many aspects of your life are affected by your credit rating. Often, it can feel like you cannot escape that score.

Getting car insurance with bad credit is just one area that may be a bit of a struggle. Why is it that car insurance coverage and rates are affected by your credit?

Today’s guide will show drivers with bad credit how to get car insurance without sacrificing their financial well-being. By the end of the article, you’ll have a plan of action to get the car insurance you need.

How Bad Credit Affects Car Insurance Rates

Car insurance rates are determined by many factors that comprise your total risk to the car insurance company for covering you. One of those factors can be credit history. If you have bad credit, you might see much higher rates than those with good credit.

Why is this?

Data gathered by researchers showed that having bad credit makes drivers a riskier investment than those with good credit. This is because those with poor credit scores often have higher claim rates than those with good credit. Similar data led the FTC to allow credit scores to be used as a determining factor for auto insurance policy rates.

How To Get Car Insurance With Bad Credit: 3 Methods

Method #1: Shop Around

The best car insurance for bad credit is going to be different for every person. Every insurance company calculates insurance rates based on various factors, and only one of those factors is credit. This means that your unique situation leads you to the specific rates that you see.

If you are not satisfied with the options being given for car insurance policies at one company, don’t be afraid to see what you can find at other companies. Shopping around is your best option to find coverage that makes sense for your current financial situation.

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Show Off Your Driving

When shopping around, look for companies that give you a chance to prove your driving ability rather than focusing solely on your credit score or financial situation. Good drivers will be able to find decent coverage this way even if they have bad credit.

Method #2: Ask Questions

If you see insurance premiums that you cannot afford, the FTC recommends that you speak with the companies to see if anything can be done to achieve more affordable rates. Some companies will allow you to provide other types of proof of your financial security and commitment to a better financial future. Others will offer plans with higher deductibles or lower limits as an option if you want to pay a lower premium.

Worst case scenario, the company will not be able to offer you any alternatives. Asking isn’t going to do any harm, however, so there is no reason not to explore this option if you are unsure how to proceed.

Method #3: Improve Your Credit

This method is aimed at the long-term, but it is still a viable method to get better car insurance. Getting out of a bad credit situation isn’t going to happen quickly, but it is possible. As you improve your credit, you can reconsider your car insurance options and find a better deal.

Auto Insurance Quotes & Your Credit

Those hyper-focused on improving their credit will have an essential question as they shop around for car insurance. 

Do auto insurance quotes affect credit?

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Auto insurance companies typically only make soft inquiries into your credit, and these will likely not affect your credit score. If you are very concerned about the risk of your credit score changing due to inquiries, make sure to do all of your comparison shopping during a week-long period.

This is because inquiries done by similar companies in a short period are often neutralized so that they do not ding your credit score multiple times.

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Getting Rental Car Insurance With Bad Credit

Drivers who want to rent a vehicle may find that they are worried about getting rental car insurance with bad credit. Rental car insurance can be overpriced, but there aren’t typically any credit-related factors in buying insurance coverage when you rent the car.

If you want to extend your personal coverage or utilize coverage provided by a credit card, this could be more difficult if you haven’t already secured those services. However, you have options for rental car insurance even if you have bad credit.

Change Your Coverage As Needed

One final piece of important advice that drivers with bad credit need to remember as they are considering their options for car insurance coverage. As your credit improves, don’t forget to reconsider what policy you have and whether or not it is the best option for you.

While you shouldn’t try to change your insurance coverage weekly or monthly, reassessing your situation in six months if you improve your credit is an excellent way to make sure that you are getting the best deal.

Call your insurance company and ask them if they can recalculate your premiums with your higher credit score. You’ll be surprised at how much you can save with a straightforward call!

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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