Car Insurance for People With Bad Credit: All You Need to Know

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Your credit score goes a long way in determining your automobile insurance premiums. While you might think that healthy financial habits can fetch you easy car loans, your credit score also affects the premiums.

In this article, we will comprehensively discuss the ins and outs of getting car insurance for bad credit drivers.

Car insurers consider individuals with poor credit scores high-risk clients since they tend to file claims more frequently. So, if your credit score looks shabby, you may struggle to find affordable insurance rates.

Experienced insurance experts like Surex can guide you in finding affordable rates even if you have bad credit. Let’s find out what your credit score has to do with automobile insurance premiums.

Why do automobile insurers check out credit scores?

Well, a car insurance policy isn’t a loan. So, why do you think the insurers would want to know your credit score?

In some provinces in Canada, auto insurers aren’t allowed to check out their clients’ credit scores. However, in other provinces, they can obtain this score on the basis of your consent. Your credit score speaks tons about your financial habits. So, insurers can draw plenty of insights about the risk level you pose. The thumb rule states that higher credit scores imply lower risk, and therefore, you shell out lower premiums.

On the other hand, a tarnished credit score points to the possibility of a chance to miss out on your monthly insurance bill payment. Ultimately, your score determines your creditworthiness and, thereby, your risk profile.

In general, car insurance companies scrutinize different aspects of your credit record. This includes:

  • The number of late payments in your account and the overall number of payments made.
  • The types of credit accounts include loans and credit cards.
  • The credit you have taken against the total usable limit.
  • The amount of debt you already have.

The Insurance Bureau of Canada (IBC) has developed a code of conduct. This governs the norms about how car insurers can use your credit score. Besides, the code ensures that no insurer can cancel a policy based on a poor credit score. This warrants adequate car insurance for people with bad credit.

Canada’s norms governing the use of credit scores by car insurers

The use of credit scores by insurers in Canada differs from province to province

  • When a company underwrites a policy in Labrador and Newfoundland, they aren’t entitled to use your credit score. They may access your criminal conviction record or accident history. However, the premiums do not depend on your credit score in any way.
  • The norms in Alberta require the car insurance company to obtain explicit consent from you before accessing your credit score. A potential customer can even decline the consent.
  • In provinces like Manitoba and British Columbia, there are no specific norms regarding the use of credit records to determine premium rates. In these provinces, the government regulates car insurance. So, there shouldn’t be any issue for a car owner.
  • If you live in Saskatchewan and Nova Scotia, insurers can freely look at their clients’ credit scores. They can use any information they need while giving you a quote.

Can a good credit score help you reduce your premiums?

Of course, yes. If you have a healthy credit score, you can allow your automobile insurer to access the same. This way, you can save a sizable part of your premium that you might be otherwise shelling out. More than 85% of the insurance companies in the US and Canada use credit scores to determine automobile insurance rates. So, if you are confident of having a healthy credit record, why not use it to your advantage?

Even if your credit score is below average, it would have little impact on your premium. This is because most insurers use an assortment of parameters to determine your premiums. These include your age, driving record, whether or not you completed a defensive driving course, demographics, and other factors. Therefore, car insurance for bad credit drivers wouldn’t be too high.

If you are in a dilemma, consult with insurance brokers. The experts can help you lower your auto insurance premiums.

Have a poor credit score? Here’s how you can reduce your premiums

Are you worried about paying high premiums on your car insurance for bad credit rating drivers? Maybe, you live in a province where the insurers have access to your credit scores. There are ways to get around this, and you need not pay something exceptionally high.

1) Maintain a clean record while driving

Insurers consider your driving record as a key determinant of your risk profile. With a clean driving record, you can significantly reduce this risk. With defensive driving habits, you can avoid traffic convictions. Refrain from distracted driving and speeding, and don’t get into collisions. This would help you keep your car insurance rates low.

2) Opt out of unnecessary coverages

Review your policy copy from time to time. Closely examine whether you have certain coverages that you can opt-out of. Besides, try to bundle your home and car insurance policy together with the same company. This will help you bag rewarding discounts that will eventually help you save money.

3) Pay more deductibles

Paying more deductibles can significantly reflect in terms of low premiums. However, take care of your budget, ensuring the obligation to pay a higher deductible doesn’t stress your wallet.

4) Do not provide access to credit score

This might sound shady, but it is completely legal in some Canadian provinces. If you reside in a province where the insurer needs your consent before viewing your credit score, you can deny them permission. Once your credit score improves, you can renegotiate the terms of your policy.

Car insurance for bad credit Canada — Endnote

The best strategy for finding affordable car insurance lies in shopping around. Consult established insurance experts to find affordable policies. These professionals keep track of the most reliable insurers in Canada. They would find an affordable policy for you depending on your credit score, eligibility, and requirements.

In the end, don’t let a poor credit score mess up your affordable auto insurance plans. With professional guidance from experts, you can find suitable coverage for your car.

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