Final Information to Automobile Insurance for Unhealthy Credit score – MarketWatch

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According to our cost analysis, depending on the state, you can pay up to 137% more for car insurance if you have poor creditworthiness. But there are ways to save ..

In this guide, we cover how your credit affects your tariff and how you can find cheaper coverage with auto insurance providers.

In this article:

  • Can you get auto insurance if you don't have good credit?

  • Average prices by company for drives with poor credit ratings

  • How to find affordable car insurance rates

  • Why insurance companies check creditworthiness

  • Which companies don't check creditworthiness?

  • What to do if you have been declined for bad credit

  • Impact of Loans on Insurance Costs by State

  • Our methodology

Can you get auto insurance if you don't have good credit?

Almost every state requires drivers to have car liability insurance, and there are many options for car insurance if you do not have good credit. That said, the options can be expensive. Depending on your state, a low credit score can increase your rate by up to 137%.

Our rate estimates suggest that, on average, a 34-year-old driver with good credit can get auto insurance for about $ 1,732 per year. Fair credit increases this to $ 2,100 and bad credit increases it further to $ 3,123 per year. That's almost double the cost of bad credit drivers.

Of course, creditworthiness is just one factor that insurance companies consider, along with things like your driving history and age. For example, a low credit rating can affect tariffs differently for 24- and 35-year-old drivers.

24 year old*

35 years old*

Good credit

$ 2,363

$ 1,732

Fair credit

$ 2,862

$ 2,100

Bad credit

$ 4,281

$ 3,123

Average tariffs by company for drivers with poor credit ratings

Some providers may be less expansive than others if you don't have good credit. While you will likely pay more than if you had excellent credit, you don't have to pay astronomically higher rates. Based on our rate estimates, USAA, Geico, Nationwide, and Progressive are the cheapest auto insurance providers for those with lower credit scores.

Car insurance company

Average cost for drivers with poor creditworthiness*

USAA

$ 1,807

Geico

$ 2,077

Nationwide

$ 2,220

Progressive

$ 2,514

Erie insurance

$ 2,602

American family insurance

$ 2,642

traveler

$ 2,949

How to find affordable car insurance rates

The number one thing you can do to find cheaper rates is to shop as much as you can. Ideally, take a few weeks before you need to renew your coverage and compare free quotes from three or more auto insurance companies. You can also look around every time your policy is about to be renewed, even if you don't plan to switch at the time.

Here are a few more ways that can help you save (but do your homework before you sign up):

  • Usage-based insurance: Usage-based telematics programs track your driving habits and reward you for driving safely. If you are a careful driver, you can lower your car insurance rates.

  • Pay per mile insurance: Other telematics motor insurance programs are based on your total mileage. Working from home or rarely driving a car can save you money.

  • Find the right discounts: Discounts and rebate amounts vary widely between companies. Look around to find the best discounts for your situation, which can include discounts for multiple vehicles, students, military, or good drivers.

Why insurance companies check creditworthiness

Let's make a quick distinction. The known creditworthiness you can check with any of the three major credit bureaus is not exactly what auto insurers consider. Car insurance companies use a credit-based insurance score to calculate risk.

The credit scoring company FICO developed the credit-based insurance scoring model in the 1990s and then subjected it to years of testing with other organizations. According to FICO, credit-based insurance models are "based on the study of millions of policies and billions of dollars in claims payments from national and regional insurance companies that represent all major geographic areas and distribution systems."

According to the Insurance Information Institute (III), several studies have confirmed a high correlation between the creditworthiness-based insurance classification and the damage-to-premium ratio for a person.

In other words, the studies found that those with low credit scores cost insurance companies more compensation than those with higher scores. According to III, 95% of home and auto insurance companies today use the model to predict risk.

Credit Score vs. Credit-Based Insurance Score

So what is the difference between credit scores and credit-based insurance scores?

Both models pull information from your credit report, but weight aspects somewhat differently. Here's how FICO's credit-based insurance score and credit score compare, according to the National Association of Insurance Commissioners and FICO.

FICO credit-based insurance score-weight

FICO Credit Score Weight

Payment history

40%

35%

Remaining debt

30%

30%

Length of credit history

fifteen%

fifteen%

New credit

10%

10%

Credit mix

5%

10%

You can see that FICO's credit-based insurance score puts more emphasis on payment history and less on the credit mix. In addition, both scores also have different ranges. FICO's standard credit ratings range from 300 to 850, while the credit-based insurance rating ranges from 100 to 900, according to Experian.

Credit-based insurance scores are not available to the public. However, both scores are similar in how they work. Basically, if you have a low credit score, you also have a low credit-based insurance rating.

Which companies don't check creditworthiness?

Whether an insurer checks your creditworthiness depends more on the state in which you live than on the company itself.

Every state except California, Hawaii, and Massachusetts allows companies to use credit-based insurance reviews as a rate factor. If you live in one of these three states, your car insurance company is not allowed to use your credit information to determine tariffs.

However, if you are not one of the lucky few, you cannot know for sure how much your creditworthiness will affect your car insurance. This is because companies don't disclose the exact factors they used to calculate tariffs or how much they weight each of those factors. For this reason, it is important to compare car insurance offers from multiple providers when shopping.

And don't worry, checking multiple offers won't affect your creditworthiness. Motor insurance companies rely on soft inquiries when checking the creditworthiness of potential policyholders.

What to do if you have been declined for bad credit

In some situations, you may find that auto insurance companies refuse your coverage or charge you inappropriately high rates due to your poor creditworthiness. If this happens multiple times, you have the right to take out car insurance through your state's assigned risk pool.

States require auto insurance companies to cover a portion of high-risk drivers, including those with very poor credit ratings. Each state does this differently, but you can usually work through an agent from a company that just turned you down to access the assigned risk pool.

Simply speak to an insurance company agent and let them know that you need coverage from the assigned risk pool. The agent can either sell you their own high risk insurance or connect you to another company that offers you coverage.

Impact of Loans on Insurance Costs by State

According to our estimates, depending on the state, motorists pay 46 to 137% more for poor creditworthiness. Each state determines how its auto insurance companies can set tariffs, including the use of a credit-based insurance score. This means that bad credit costs drivers more in some states than in others.

For example, a bad credit score in Georgia can increase your interest rates by about 63%, while a bad credit score in Wisconsin can increase your interest rates by up to 122%. The following table shows the average rate estimates by state for a 35-year-old driver with good and bad credit ratings and the premium increase between the two averages. *

State

Annual cost of car insurance with a good credit rating

Annual cost of auto insurance for bad credit

Premium increase

Alabama

$ 1,478

$ 2,720

84%

Alaska

$ 1,315

$ 2,092

59%

Arizona

$ 1,658

$ 3,733

125%

Arkansas

$ 1,462

$ 2,694

84%

California

$ 2,519

$ 2,519

0%

Colorado

$ 1,688

$ 2,862

70%

Connecticut

$ 1,900

$ 4,056

114%

Delaware

$ 1,943

$ 3,255

68%

Florida

$ 2,927

$ 5,339

82%

Georgia

$ 1,587

$ 2,581

63%

Hawaii

$ 1,255

$ 1,255

0%

Idaho

$ 1,113

$ 2,058

85%

Illinois

$ 1,494

$ 2,594

74%

Indiana

$ 1,106

$ 1,995

80%

Iowa

$ 1,121

$ 1,975

76%

Kansas

$ 1,398

$ 2,347

68%

Kentucky

$ 1,843

$ 3,634

97%

Louisiana

$ 3,867

$ 6,955

80%

Maine

$ 1,013

$ 2,227

120%

Maryland

$ 1,970

$ 3,179

61%

Massachusetts

$ 2,632

$ 2,632

0%

Michigan

$ 4,430

$ 9,936

124%

Minnesota

$ 1,515

$ 3,107

105%

Mississippi

$ 1,379

$ 2,652

92%

Missouri

$ 1,763

$ 3,191

81%

Montana

$ 2,243

$ 3,557

59%

Nebraska

$ 1,394

$ 2,728

96%

Nevada

$ 2,354

$ 3,665

56%

New Hampshire

$ 1,190

$ 2,635

121%

New Jersey

$ 2,132

$ 4,232

99%

New Mexico

$ 1,385

$ 2,346

69%

new York

$ 4,048

$ 9,595

137%

North Carolina

$ 1,278

$ 1,863

46%

North Dakota

$ 1,341

$ 2,469

84%

Ohio

$ 939

$ 1,614

72%

Oklahoma

$ 1,652

$ 2,718

65%

Oregon

$ 1,302

$ 2,243

72%

Pennsylvania

$ 1,447

$ 2,465

70%

Rhode Island

$ 1,947

$ 3,578

84%

South carolina

$ 1,610

$ 2,813

75%

South Dakota

$ 1,348

$ 2,733

103%

Tennessee

$ 1,237

$ 2,496

102%

Texas

$ 2,094

$ 3,422

63%

Utah

$ 1,463

$ 2,883

97%

Vermont

$ 1,029

$ 1,919

86%

Virginia

$ 1,109

$ 1,833

65%

Washington

$ 1,286

$ 2,086

62%

Washington, D.C.

$ 1,812

$ 3,238

79%

West Virginia

$ 1,418

$ 2,610

84%

Wisconsin

$ 970

$ 2,150

122%

Wyoming

$ 1,542

$ 2,669

73%

Every time you buy car insurance, we recommend comparing several free offers to find the best prices.

* Estimates of auto insurance rates are compiled by Quadrant Information Services.

* Data correct at the time of publication.

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