You might think you know all there is to know about getting decent rates on insurance for your vehicle, but did you know this: Bad credit increases car insurance costs. The plain and unvarnished truth is that it does. The question then becomes, how much does having less-than-stellar credit cost you when it comes to getting car insurance?

According to an article in, having bad credit can cost you to the tune of an extra $30, $50, even $100 a month. Who really wants to shell out that much additional just for a good car insurance policy?

Here are some other points to keep in mind relative to how your credit affects your car insurance costs.

Insurers Routinely Check Your Credit Rating – Although this isn’t permitted in some states, in most states, auto insurance companies routinely check your credit rating as part of the application process for a new policy. Credit scores help the companies determine if you’re a good (or poor) potential risk. Why? Applicants with low credit scores, that is, under the range of 600, have a greater likelihood of filing claims, making exaggerated claims, and even committing insurance fraud.

Low FICO Score = Higher Premiums – Let’s face it. If your FICO score (which is based 35 percent on payment history, 30 percent on amounts owed, 15 percent on length of credit history, 10 percent on new credit, and 10 percent on types of credit used) is 600 or lower, you’re likely to incur a surcharge on your car insurance. If, on the other hand, your credit score is in the 700-800 range, your premiums will be unaffected (that is, they won’t increase due to your credit score). Sound unfair? That’s just the way it is.

Bad Credit May Affect How You Can Pay – Another way that bad credit negatively impacts how much you pay for car insurance is that the insurer may not allow you to pay for your policy. That’s because those policyholders with poor credit are more likely to miss a payment. What does this mean for you, if you have bad credit? Your car insurance company, or the one you’re applying to for a policy, may require that you pay the full six-month or annual premium up-front instead of paying monthly. Or, if your insurer does allow you to pay monthly, they may stipulate that you can do so only after you plunk down a sizeable percentage of the total premium due first. Either way, it’s more money out of your pocket when you get your policy.

Poor Credit May Mean High-Risk Insurers – Not only do the biggest and best auto insurance companies want policyholders with good to excellent credit – to minimize how much they have to shell out in claims – but these prime car insurers don’t want any part of customers with bad credit. Sure, they’ll maybe take some, especially if the person has been a policyholder with them for years, but the rates will skyrocket. Those with bad credit seeking first-time or new auto insurance may be relegated to high-risk insurance companies with, you guessed it, equally high car insurance rates.

Of course, car insurance premiums for those with bad or good credit, are based on other factors, some of which can make a big difference when you’re shopping for a new policy. Where you live, how many miles you drive annually, what you drive, your driving record, past history of accidents, tickets and claims, and other factors are all taken into account. You do have some measure of control over several of these factors, and you can work on improving your credit score to equalize or minimize other potential negatives.

Remember that maintaining a good credit history and score is one of the best things you can do to help reduce your overall car insurance costs.

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