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How Does Bad Credit Affect Car Insurance?

You know that accidents can affect your car insurance. But did you know that your credit can impact your car insurance? Car insurance companies take your credit into consideration when charging you in 46 states, including Maryland. At MAIF, the Maryland Auto Insurance Fund, we want Maryland drivers to get coverage. If you currently have bad credit and are curious about your options when it comes to car insurance, read on.

How Does Bad Credit Affect Car Insurance?

Credit Scores and Car Insurance Coverage

A credit score can range from 300-850 and is often an indicator of how quickly you pay off your debts. This FICO or credit score looks at your payment history, the amount owed, length of credit history, new credit, and mix of credit types to create a credit score. Your credit score can impact your ability to rent or buy houses, take out loans, and even get affordable car insurance.

Car insurance companies take credit scores into consideration because drivers with higher credit scores are typically more likely to file insurance claims. This means these drivers are more expensive to insure. If you have bad credit, you will notice an increase in your car insurance. While you will remain covered, you can potentially pay hundreds more if you have a low credit score.

How Bad Credit Affects Car Insurance Rates

In the state of Maryland, if you have poor credit and get into an accident, you can see an increase in your car insurance by 72%, or $1,149 on average. This increase can make car insurance unaffordable.

So what can you do to lower your car insurance if you have bad credit? Increase your credit score.

To increase your credit score, you can:

  • Pay off debts and loans
  • Build your credit (through cards
  • Don’t miss your payments
  • Limit applying to new accounts

Depending on the cause of your low score, it can take some time to see a credit increase. Focus on the cause of the score to raise your score. Common reasons why many people have low credit scores include debt or missed payments. Paying off your debt and paying your credit card on time can help increase your score.

After you increase your credit score, you can compare auto insurance quotes. It’s important to stay covered by auto insurance because you can pay even more if you don’t have car insurance and get into an accident.

At MAIF Insurance, we’re here for drivers who cannot get coverage but need car insurance. Call 301.476.4887 or get a free car insurance quote on our website. If you have questions about your credit and insurance coverage, feel free to ask our team. We are here to help you find the best plan for your budget.