When looking for auto insurance, it’s advisable to consider all the factors. These include your gender, type of vehicle, where you drive, car’s history and mileage, as well as how safe of a driver you are. Your credit score might also bear some weight when determining your insurance premium.
Some auto insurance providers believe there’s a link between your debt management and the risk of causing a road accident and filing claims. A good credit rating can reduce auto insurance premiums in most provinces except Newfoundland, Labrador, and Ontario. Some people assume you cannot get insurance because you have poor credit. That’s not true because car insurance is mandatory in Canada.
Here is a dive into how your poor credit score may affect your insurance rates and tips on improving your score to avoid paying more for auto coverage in the future.
Why Credit Matters When It Comes to Auto Insurance
Generally speaking, better drivers have better credit. Insurers charge higher premiums because they need fair compensation for the risks they take by accepting customers with bad credit. If you want a reasonable auto insurance rate, start working on your credit score today.
Good credit can’t compensate for a shameful driving record, but a poor credit score can hurt a clean driving record. Whether your premium is based on your credit record depends on where you have registered your vehicle. For example, in Nova Scotia, you must submit your credit report to the insurer so they can calculate your premium. Failure to do so will result in denial.
In Alberta, insurance companies should get your consent before using your credit score to determine your rate. You have the right to refuse and move on to another provider. Where provincial laws govern car insurance policies, e.g., in Saskatchewan, Manitoba, and BC, the rules are relaxed, so the credit score should not worry you.
When credit history becomes a criterion for calculating auto insurance premiums, it affects drivers who have acquired vehicles through car dealerships low credit. However, a sub-par credit score plays only a small role in the cost of auto insurance. You still stand a chance to get reasonably priced coverage if you’re an experienced driver with no history of collision or traffic tickets.
How to Improve Your Credit for Better Auto Coverage
Improving your credit can make it easier to obtain coverage and help you save money on insurance premiums. A good credit score is beneficial in many ways. It can open doors to better financing options and credit opportunities, as lenders are more likely to approve borrowers with good credit ratings. Here are ways to improve your credit.
- Pay your bills on time
- Repay your outstanding debt
- Apply for a secured credit card to repair your credit
- Keep your credit utilization ratio on the low
- Check your credit report for errors and fix them
- Limit your applications for new credit cards
- Avoid closing unused credit cards
- Ask to be listed as an authorized user on someone’s card
- Increase credit limit but retain the same spending habits
One of the factors insurers use to determine your car insurance is your credit score. And it’s not one that you should ignore even if you use bad credit car finance dealerships to buy a new vehicle. Auto insurance providers have different requirements depending on their policies and provincial laws. If you’re committed to improving your creditworthiness, you have a greater chance of getting the lowest rate possible in the future.
