Understanding Insurance Policies

Three Practical Tips for Getting Low Auto Insurance Rates with a Poor Credit Score

26 October 2016

Samantha Reynolds

A poor credit score can lead to high auto insurance premiums. However, there are measures you can take to mitigate the effect and enjoy reasonable rates. Here are three examples of measures that work:

Ensure Your Credit Reports Are Accurate

You may have bad credit, but is it as bad as your report shows? Human error can introduce mistakes in your credit reporting and scoring, so it's advisable to ensure that the low report reflects your true situation before shopping for insurance. According to research the Federal Trade Commission (FTC) carried out a few years ago, 1 in 4 consumers had errors in their reports that could affect their ratings.

Common errors in credit reports include things like:

• False information due to confusion of data; for example, your report may contain data belonging to another person.
• Information from a former spouse that is still is in your records.
• Incorrect payment records.

Therefore, get your records from the three major reporting bureaus and confirm their accuracy before buying car insurance.

Be Careful about the Type of Credit You Use

The second trick is to recognize that not all credits are created equal; car insurers give more weight to some while frowning on other types. Therefore, you need to distinguish between these two categories of credit so that you can concentrate on the ones that carry favor with insurers and avoid the rest.

Many insurers use scoring methods that favor credit cards issued by major oil companies, such as Shell, ExxonMobil, and Gulf credit cards. Therefore, you can boost your credit score greatly by applying for and using such cards. National bank credit cards, such as MasterCard, Visa, and American Express are also viewed favorably.

On the other end of the scale, credit from small stores and service stations or instant credit from stores may not carry that much weight. This is probably because these small businesses may not be as stringent as major businesses when choosing whom to extend their credit to.

Request an Exception

Lastly, you can request for an exception if you have had good credit all along but it has suddenly suffered from an extraordinary life circumstance. Anyone's credit rating can dip after an unexpected job loss or catastrophic illness. Therefore, some insurers may give you a break by not factoring the effects of such a catastrophe in your credit scoring.

In addition to the above advice, it also pays to work with an experienced insurance agent who understands how the industry works and can offer you practical suggestions. Don't let your poor credit scores shoot your insurance rates through the roof. For more information, talk to an agent like those at Angel Auto Insurance.

Share