One of the many financial hardships that come with having a poor credit score is an increase in the cost of car insurance. Statistically, drivers with poor credit are 40 percent more likely to file claims than drivers with good credit, so their premiums tend to rise accordingly. Fortunately, credit is not the only factor that goes into determining insurance rates. Taking several steps to address the issue can keep the cost of insurance down while you rebuild your credit.
Every insurance company charges more for drivers who have bad credit, but every company weighs your credit score differently as compared to other factors. With some insurers, having bad credit increases your premium by a whopping 50 percent; with others, the increase is a much more tolerable 20 percent. Take advantage of the differences between companies by shopping around, getting quotes from as many insurers as possible and selecting the policy where your bad credit hurts least. Online sites like ired.com make this much easier to do, as they offer quotes from multiple insurance companies on one phone call.
Look for Discounts
Qualifying for discounts on your premiums can help offset the increased cost that comes with having bad credit. Some insurers offer discounts for drivers who take optional safety courses; the one-time expense of taking the class is easily offset by savings on your insurance. Other common offers include good student discounts, safe driver discounts, low mileage discounts and multi-policy discounts. Evaluate your available options and try to qualify for as many discounts as possible; be prepared to switch insurers to qualify for more.
Get a Different Car
One of the biggest factors in determining insurance rates is the accident history of each make and model of car. In general, models that have been in more accidents cost more to insure than those that have been in fewer accidents. Cars with certain optional safety features cost less to insure as well. If you plan on buying a new car, take the cost of insurance into account and consider paying more up front to spend less on premiums down the road. Bear in mind that with bad credit, you will need to either pay cash for the car or pay a higher rate on your car loan.
Raise Your Deductible
If you need to file a claim, the deductible is the amount of money you are responsible for before your insurer steps in. A $500 deductible is standard for most policies in the United States, but you can always opt to increase it. Doing so reduces the insurance company’s risk and thus lowers your monthly premiums. Be sure to set aside some of the money you save on premiums, though, just in case you end up having to pay the higher deductible.
Reduce Your Coverage
For most older cars, it is not financially wise to have more than basic insurance coverage. If the total cost of your premium and your deductible is more than the book value of your car, consider dropping comprehensive and collision coverage and putting some money away to pay for repairs or purchase a new car in case of an accident. Furthermore, if you have an unused vehicle or one that you only drive for part of the year, consider downgrading to cheaper storage insurance, but don’t forget to reacquire basic coverage if you decide to drive the car again.