Can One Buy Car Insurance With a Poor Credit Rating?

There are primarily two factors that can seriously affect a person's ability to obtain car insurance. These two factors are driving history and credit report history. It can be difficult for an individual with poor credit to obtain car insurance, but it isn't impossible. Car insurance is a prerequisite for every driver, so a clear understanding of the correlation between insurance and credit scores is vital.

Car Insurance Premiums

The premium is often affected if a person has a bad credit score. According to Consumer Bad Credit Guide, insurance companies charge a higher premium for those individuals with bad credit because there's an increased chance the individual is likely to file a claim. Stability is also a factor that insurance companies take into account: Individuals with bad credit histories are perceived as less stable and more of a risk to insure.

Updating a Credit Report

An individual with poor credit ratings and history can obtain a free credit report thanks to the Fair Credit Reporting Act. A free report will give her a clear view of the negative items and derogatory marks affecting her credit report. Next, it's vital to remove any incorrect or out-of-date information from the credit report. This is usually done through a dispute process. Finally, she should clean up her score as much as possible. This can be done by paying old debts and current credit obligations on time.

Benefits of Credit Rating Improvement

According to U.S. Insurance Online, most insurance companies are willing to lower a person's car insurance premiums once his credit rating improves. Once the person improves his credit rating, he should contact his insurance agent to determine if he qualifies for a lower rate.

Considerations

Because there are numerous factors taken into consideration by insurance companies, individuals should make sure what factors determine their particular auto insurance rates. For example, some companies only consider major credit events such as bankruptcies and foreclosures when setting a premium. Understanding how the rate is determined can help a person find the best insurer for his needs.

Offsetting Costs

There are steps that a person can take to offset the costs that higher premiums add to her car insurance. Of course, improving her credit score should be a top consideration. She should also consider purchasing a cheaper car that costs less to insure. Comparing different companies can also help the customer make educated decisions and save money.