Building good credit offers plenty of rewards to the American consumer. When it comes to buying auto insurance, no credit or bad credit can make the difference between an affordable policy and a costly premium. Can you overcome a bad credit history? Yes!
Why Insurers look at Credit History
The Insurance Information Institute explains that companies use a personal credit history to arrive at an “insurance score,” which determines an underwriter’s decision to assign a premium to a consumer. In theory, building good credit and managing money wisely is considered a sign of responsibility and maturity, which should translate into safer driving practices and the subsequent unlikelihood of insurance claims.
Undertake a Credit History Makeover
Get your financial house in order. Insurers look at payment histories, the length of time since you established credit, and also the types of indebtedness you undertake. Contact creditors and negotiate payment arrangements – if you have not done so already – or work with a consumer credit counselor to bring delinquent accounts current.
While this step does ding your credit history further, you have precious little to lose. Bite the bullet and get a high-risk credit card from an agency that reports to the credit bureaus; these are popular with bankruptcy clients needing to start over. Building good credit with this one card – at least until your score is sufficiently high to apply for a lower interest option – can make a huge difference to a bad credit history.
Plead a Case of ‘Unusual Life Situations’
For maximum effect, work with an insurance agent in person. Insurers realize that there is more to a consumer than a bad credit history. If you have undergone a divorce or suffered a death in the family, your financial house may have been thrown in disarray. An illness or unexpected bout of unemployment, too, adversely affects credit – even though these are only temporary life situations.
Losing a home to fire or flood, becoming a victim of identity theft or undertaking active military duty are other circumstances that might upset your credit. Explaining your situation – in person – to an agent can have huge benefits. Work with the professional to put an extraordinary situation in terms that the insurance company will accept – and not hold against you.
Buy Car Insurance without Credit Check
When buying auto insurance, no credit checked, the rates are going to be a lot higher than you may have been used to paying in the past. To stay on the good side of the law, buying car insurance is mandatory. If conventional policy rates are astronomically priced, a no-credit policy may be a good option.
Even here there are significant price differences; go through an insurance broker who specializes in these policies. If at all possible, do not file a claim against the insurer. After proving yourself to be a responsible motorist for a while, try to once again apply for a conventional policy. Having consistently paid your premiums and not filed any claims against the other company may work in your favor.
Source
Insurance Information Institute: “What does my credit rating have to do with purchasing insurance?”