You may be aware that bad credit can increase the cost of your car insurance. Poor credit car insurance is much more expensive than insurance for good credit as more than 90% insurance companies consider credit scores to determine car insurance costs.

Insurance companies in all states, except California, Hawaii, and Massachusetts, use credit score to determine the cost of your car insurance. These three states have banned the practice. So, if you are a resident of any of these three states you can buy cheap car insurance for bad credit without your credit being reviewed.

Insurance companies do not use the credit score as used in car loan approval. There is a specially designed credit score that allows insurance companies to base the costs of car or home insurance. This special score helps insurers assess the probability of your filing a claim, as against the traditional credit score that helps lenders assess your repayment capability. Therefore, getting car insurance with bad credit comes at a higher price.

Similar to bad driving history auto insurance, getting car insurance with bad credit is costly because insurance companies believe poor credit has a direct bearing on filing costly claims. People who pay off their dues on time are less likely to file costly claims than those that have poor credit or faced delinquencies, much like bad drivers posing higher risks than those with safe driving records.

With a bad insurance credit score, the impact on the car insurance costs can be severe. For instance, a study conducted by Quadrant Information Services for Insurance.com found that nationwide, the average difference between costs of good credit car insurance and poor credit car insurance was a whopping 67% while that between average and good credit was 17%. The comparison was made in the rates of full coverage for good, average, and poor credits.

Another fallout of getting car insurance bad credit is that you may be asked to pay a large down payment. You may also be offered limited payment options when looking for cheap car insurance for bad credit. Poor credit affects many financial aspects of your life. Therefore, it is essential to know your credit score and keep monitoring the credit report to minimize financial mistakes that can adversely affect both. To keep your credit score and report in top shape, consider paying your bills and dues on time, keep credit balances low, and maintain credit.