Generally, whether a poor credit score affects car insurance premiums or not depends on how you want to pay premiums. If you want to pay for the car cover annually in a lump sum, it would not affect your premium. It is because you only pay the price that you get a quote for.
Alternatively, if you want to spread the costs of the premiums in instalments, your credit score may impact the premiums in that case. Here, the car insurance provider may ask you to pay more. It is because of your poor credit history. It reveals that you struggled to clear debts in the past. Thus, lenders may not provide you the facility to pay in one lump sum. It increases the risk for them.
Let’s know how it all happens.
Let’s begin from the beginning.
Do car insurance providers conduct detailed credit checks?
Yes, every insurance provider conducts necessary credit checks before providing the coverage. It helps them analyse the person’s finances, liabilities and income. Furthermore, one experiences only a soft credit check initially. It does not impact the credit score. Check helps them verify basic details like – name, age and residential address.
However, it is just a basic check and does not detail the complete story of the applicant. It is the reason providers conduct a hard search. The checks get recorded and impact the credit score at the time of loan approval. Moreover, it helps the insurer understand your financials better. They analyse how well you manage debt.
While applying for car insurance, refrain from making multiple applications. It may lead to a severe credit drop.
1. Does the poor credit score increase the premium costs?
Yes, it does. As mentioned above, lenders find the individual with a bad credit profile risky. Thus, they impose high-interest rates and insurance terms to get one. High interest rates automatically increase the costs of monthly premiums. It implies you pay high interest on top of the actual premium amount.
Alternatively, individuals with a good credit history get lower interest rates and terms. It implies they pay cheaper premiums compared to individuals with a bad credit history. It helps them save more for their next goals and qualify for new credit cards and premiums at astonishing rates.
2. Can an insurer reject the car insurance application due to bad credit?
Yes, he may. For obvious reasons, not every insurance provider considers poor credit history individuals for car insurance. Thus, it is better to improve your credit history before applying for car finance and car insurance coverage. It increases chances to qualify and get low terms and interest costs.
Apart from that, there could be other reasons for a company to reject your car insurance coverage. It could be due to age, driving history, non-repayment on past insurance policies or driving license. The company analyses your profile and enquires about certain things before the final call.
Now, you must be thinking-
What can I do to get lower premiums despite poor credit history?
Yes, some aspects may help you still. You can improve your chances of getting better car insurance coverage with affordable premiums. If you have tried everything to get one but return hopeless, the below tips may help you:
1) Clear the previous debts
It is one of the first things to concentrate on. It could help you get a quick approval on car insurance premiums. Thus, analyse the previous debts and begin with the oldest one. Check the ones you can clear by prioritising the high-interest debts first.
Once you have the list and the total amount, analyse how to pay the debt. You can pay it by budgeting it for a month. Eventually, the debt payment will boost the credit rating.
If you want, you can also consolidate the debts. You can get a loan with bad credit in Ireland’s marketplace for consolidation. Just analyse the costs and interest rates and apply. It would be ideal for you if you have several debts in the credit report.
2) Add an experienced driver to the policy
If you are a young driver with not much experience on the board, this tip may help you. You can add an experienced driver to the car insurance policy. It would lend responsibility and reliability to your car insurance premium application. Moreover, it would help you get better interest rates and costs.
Identify whether you have someone close who knows driving and has been driving for good years now. It could be your dad, mom, brother or anyone. You need to prove their driving experience and guarantee the premiums.
3. Pay for the policy upfront
However, not every car insurance company provides the flexibility to pay some money as premium costs upfront. Leave nothing to chance. Explore the possibilities of the same by researching and asking the known ones.
If you find a car insurance company that lets you pay ahead of the agreement, it lowers the liabilities and interest on insurance. By doing so, you only reduce your liabilities towards the insurance premium. Just read through the fine print carefully before signing off the agreement. It would prevent you from landing the wrong insurance cover and paying the excess amount later.
4. Compare the policies before applying
Before halting with the first best option that you find, explore what others offer. It would help you lower the costs of the insurance drastically. What good is it to pay 10% more? Right?
Thus, find the best car insurance policy that aligns with your budget and liabilities. Apart from the interest rates, check the facilities they provide. If it justifies the interest rates and premiums, you choose that one.
5. Cut back on mileage
Yes, it could help you to an extent to qualify for lower and affordable car insurance. If you recently bought a car on finance, identify the mileage allowed. Certain car finance agreements like PCP or HP have a mileage limit. Driving within that can help you pay low premiums every month. Moreover, it would keep the car in good condition.
However, some individuals struggle to miss premiums because of sudden financial drops. Do not worry. External facilities like loans from direct lenders may help you here. Check and grab legit loans in Ireland’s market by identifying the policy and checking the lender’s status. If the lender shares a physical location with a relevant contact number and testimonials, you can apply.
Poor credit score impacts car insurance and premiums to an extent. You may not get affordable premiums with a low credit score. However, you can certainly improve your prospects to get one with the above ways.
Understanding your car finance agreement and finances is critical to getting the right insurance. Once you know that, you may qualify for affordable premiums hassle-free.
Caleb works as a senior content writer at Financealoan for the past 3 years. He is a writing enthusiast and invests a good time in exploring and writing about financial trends. His keenness in exploring a topic to create a research-based piece is simply unmatched. He believes in including a texture of authenticity with real-time examples and facts.
Caleb’s blogs and articles reveal deep-seated knowledge and expertise. His educational qualification forms the base of his excellent command over the industry and Jargon. He is a postgraduate in Finance and is currently involved in exploring the world of the stock market.