McAfee Secure sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scams

Car Insurance Without Credit Checks

If you are coming up on the expiration of your current car insurance policy and are beginning to look into your options for your next one, chances are you have heard about the importance of good credit when it comes to the prices you may pay for your policy. Credit-based car insurance scoring is a standard practice across the auto insurance industry, and although it has been debated strenuously in different areas of the country, it is currently still the legal standard. Your credit score is a very important factor insurers take into account when determining both the rates you pay and even your eligibility for coverage. Although many drivers are unaware of the reasons behind this, there is really no mystery to it, and it is easy enough to understand the industry's reasons for using credit as a determining factor in setting rates.

Why Insurers Check Your Credit

Credit-based insurance scoring is a useful tool for underwriters to assess the risk of taking on a customer. Since an auto insurance provider cannot exactly follow every driver around to personally see how they are as drivers, providers must use indirect means to assign risk. Credit-based scoring has been the subject of much criticism recently, but it has been in use for many years, and the auto insurance industry has repeatedly studied the correlation between credit and risk, consistently discovering a strong positive connection between good credit and low risk, as well as a corresponding connection between bad credit and high risk.

In other words, the group of drivers who have high credit scores have been found in numerous studies to exhibit a substantially lower risk of exhibiting driving behaviors leading to claims. Conversely, the group with lower credit scores have been shown to exhibit a higher risk of filing claims. This correlation has been shown in study after study, making this one of the touchstones of industry research on indirect means of assessing risk.

Of course, no insurer would claim that they can accurately predict any one individual driver's performance or claim pattern based on their credit score alone. The correlation is undeniable when viewed in light of the larger group of insured drivers, not necessarily in every single individual case. People with lower credit scores tend to file more claims, and those claims tend to be more expensive for the insurer. This connection is analogous to the one between inexperience behind the wheel and high rates of accidents. Teens pay more for car insurance as members of this group before they ever receive a citation or even get behind the wheel at all. The practice of credit-based scoring is a function of the tendencies of the whole demographic and not necessarily an indictment of any individual driver.

For this reason, it is important to respond effectively if you find yourself in a situation in which your credit compromises your ability to get an affordable policy. You may have run into tough times here recently, as many of us have. Perhaps your credit is not where it ought to be due to late payments or other issues stemming from recent financial troubles. If you have experienced job loss or layoff, and seen your cash flow seriously affected, chances are those effects have carried over in some way onto your credit report. While there is nothing you can do about past mistakes or mishaps, aside from repaying your obligations, there is a way you could potentially counteract the effects of your credit score on your auto insurance premium.

Finding No Credit Check Plans

No credit check car insurance plans are available, though you may have to do a little investigating to find one. Certainly not every auto insurer offers this option, but some do. If you are concerned about the potential effects of your credit on your upcoming renewal, or if you have been canceled or non-renewed due to credit issues, you should definitely look into this option as a way of dealing with the problem in the short term while working to address your credit issues to aid in the long term.

Most companies use credit-based insurance scoring to help them determine premiums and eligibility for certain programs. In fact, all major insurance companies utilize credit-based scoring to some degree. But the extent to which each company relies on this method varies from company to company. There are some who will not sell a policy to anyone without a credit check, while others have chosen to branch out into this area of coverage and offer customers another option in an effort to set themselves apart. If you are having trouble finding a company who will sell you a policy with no credit check, contact your home state's insurance department for more information. They will likely be able to either provide you with a list of state insurers who make such plans available for customers, or refer you to someone who can furnish you with this type of list.

So getting into a car insurance policy without having your credit pulled should not be an impossible task. However, there are some important considerations to keep in mind as you ponder this option. First of all, as a prospective client pursuing this option, you are communicating to your insurer that you do, in fact, have very poor credit. Providers offering this type of policy have to keep this in mind; and in order to be assured of collecting enough premiums to cover their costs, they will likely have to add some kind of surcharge to your plan in order to make it happen. Bear this in mind before going ahead with this option. If your credit troubles are moderate, go ahead and get some quotes from standard carriers as well, to see how the price differences might shake out. But if they are severe, you may find that this could be your best option right now.

Keep Up With Credit Report

As always, it is important for you to keep up with your credit report. If you have had a tumultuous year economically, resulting in some marks on your credit, take advantage of your right to see your credit report so you can assess the true damage any of your missteps have done to your score. This can also give you a chance to find and correct any mistakes that may be present. It is bad enough to suffer the consequences of missed payments and the like without also having to pay for mistakes you didn't even make. So get a hold of your credit report at least once a year and be sure to stay on top of things. Of particular interest might be accounts in collection. As you repay your obligations, be sure your report is updated.

Car insurance without credit checks is a viable option worth looking into for certain groups of drivers who have serious credit issues. But it is not always the right option, and a measure of restraint should always be used when you are investigating your choices. Do not assume your credit issues will automatically prevent you from obtaining more traditional auto insurance protection until you look into this option.

 

partners

FREE Quotes, Multiple Insurers

Zip Code