• Does Bad Credit Affect Getting the Best Auto Insurance Rate?

    It will be a cruel blow to those who may have defaulted on a previous loan, missed a few bills, or otherwise trashed an individual credit reputation, but the fact is that just as bad credit affects the terms of financing for a vehicle, it can also stop you from getting the best auto insurance rates around.

    How Insurers May Interpret Your Credit Score

    Some insurers are getting aggressive about weeding out customers with bad creditbut why is that? Are they afraid these customers won’t pay? Yes, insurance is something that is paid in installments, but it’s not like they’re lending a physical product. Nevertheless, the insurance company might argue that since they are underwriting a driver’s risk, if they get paid in monthly premiums or other installmants, they have a right to the best customers with a decent credit history.

    But that’s only half of the story. Auto insurance companies are in the business of risk assessment. What some consumer advocates have found is that auto insurance companies are looking at some bad credit scores as reflecting the record of a “reckless driver.” The tortured logic is that if someone is careless about their finances, they may also be careless on the road. This leap of logic is far from true in many cases, but that doesn’t stop insurers from using a bad credit score to their advantage.

    Some Tips for Bad Credit Car Insurance

    In the world of “bad credit car insurance,” the consumer has to shop around to see if they can mitigate the negative effect of their less than stellar score. Consumers with credit scores under 600 may be forced to pay higher rates or settle for their third favorite insurer. Some things drivers can do:

    • Get your credit report and check out your FICO credit score
    • Look into short term options for bumping up your score
    • Find out how long you will be negatively impacted by a judgment
    • Shop around for insurers who don’t “value” your credit score in their risk ratings
    • “Refinance” or re-negotiate your insurance as soon as your score clears up

    Knowing about your current credit score is the best way to deal with the situation. Drivers can also seek out “no credit check car insurance” agreementsbut make sure these aren’t just ways to throw the highest rates at a customer.

    The above will help drivers with bad credit make good choices for staying behind the wheel.