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Got Bad Credit? Expect to Pay More for Auto Insurance

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If you are a St. Louisan car buyer with bad credit, you probably already know that you will be paying more auto loan interest. What you probably didn’t know is that you will also be paying more auto insurance. According to InsuranceQuotes.com, those with bad credit pay double for auto insurance premiums compared to those with stellar credit. This fact should be enough encouragement for you to try to improve your credit.

 

Why Bad Credit Drivers Pay More Auto Insurance

There are many factors that determine how much auto insurance you must pay. These include your age, gender, your driving record, the vehicle you are driving and where you live. Credit is but one of these factors, but if all others stay the same, credit is that which makes the most difference. The exact reason why credit greatly influences auto insurance rates remain uncertain. However, insurers attribute bad credit to more claims. The more claims there are, the higher the rates.

 

What Bad Credit Drivers Should Do

Of all the factors that impact auto insurance costs, credit is that which is most within your control. There are things you can do to turn your credit situation around and in turn lower your auto insurance premiums. These include the following:

 

Review your credit report

It is possible that you are not at fault for your less than ideal credit standing. You may have been a victim of identity theft and the perpetrator misused your credit. Regardless of whose at fault in your situation, it is your responsibility to set things right.

Get a free copy of your credit report from each of the credit bureaus (Equifax, Experian and TransUnion) at AnnualCreditReport.com. You are entitled to one free copy each year. Review the report and see if there are incorrect information. Dispute the errors in the report by sending a letter to the credit bureau via registered mail.

 

Make timely payments

Payment history accounts for 35 percent of your credit score. Even just a couple of late or missed payments can cause a dent in your record. Keep your payment history clean by making payments on time. If you have a hard time remembering due dates, enroll in an electronic transfer service for automatic payments.

 

Keep borrowing at a minimum

Amounts owed, which compares how much credit is available and how much of it you use, make up 30 percent of your credit score. You shouldn’t use all credit just because it is yours for the taking. The more you use, the lower your score. This is why you should only use 10 percent or less of your available credit.

 

Manage available credit well and refrain from always applying for new credit

Types of credit used and new credit each account for 10 percent of your credit score. Aside from auto loans, credit types include student loans, mortgages and credit cards. The more credit types you use (and use well), the better your score will be. As for new credit, don’t apply for it if you don’t need it. Multiple requests in a short span of time reduce your score considerably.

 

A Note to St. Louisans

Missouri is not one of the states where auto insurance is most expensive, so you need not consider moving to a different place just to save more money. If you want to further reduce your insurance premiums, the best non-credit related ways to do it include driving safely, raising your deductibles and not getting duplicate coverages.

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