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How to get car insurance if you don’t have good credit

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According to our cost research, if you have poor credit, you could be paying as much as 137% more for car insurance depending on your state. But there are ways to save..

In this guide, we’ll cover how your credit affects your rate and how to shop for more affordable coverage from car insurance providers.

In this article:

  • Can you get car insurance if you don’t have good credit?

  • Average rates, by company, for drives with poor credit

  • How to find cheap rates for car insurance

  • Why insurance companies check credit

  • Which companies don’t check credit?

  • What to do if you’ve been turned down for poor credit

  • How credit affects insurance costs by state

  • Our methodology

Can you get car insurance if you don’t have good credit?

Almost every state requires drivers to carry liability car insurance, and there are plenty of options for car insurance if you don’t have good credit. That said, the options might be expensive. Depending on your state, having a low credit score can increase your rate by as much as 137%.

According to our rate estimates, a 34-year-old driver with good credit can find car insurance for about $1,732 per year on average. A fair credit score increases that to $2,100, and a poor score increases it further to $3,123 annually. That’s nearly double the cost for poor credit drivers.

Of course, credit score is just one factor insurance companies consider, along with things like your driving history and age. Here’s how having a low credit score can influence rates for 24- and 35-year-old drivers differently.

24-year-old*

35-year-old*

Good Credit

$2,363

$1,732

Fair Credit

$2,862

$2,100

Poor Credit

$4,281

$3,123

Average rates, by company, for drivers with poor credit

Some providers may be less expansive than others if you don’t have good credit. While you will probably pay more than you would if you had excellent credit, you don’t have to pay astronomically higher rates. According to our rate estimates, the cheapest companies for car insurance for those with lower credit scores include USAA, Geico, Nationwide and Progressive

Car Insurance Company

Average Cost For Poor Credit Drivers*

USAA

$1,807

Geico

$2,077

Nationwide

$2,220

Progressive

$2,514

Erie Insurance

$2,602

American Family Insurance

$2,642

Travelers

$2,949

How to find cheap rates for car insurance

The No. 1 thing you can do to find cheaper rates is to shop around as much as possible. Ideally, take a couple of weeks before you need to renew your coverage and compare free quotes from three or more car insurance companies. You can also shop around each time your policy is up for renewal, even if you don’t plan on switching at that time.

Here are a few more ways that might help you save (but do your homework before you opt in):

  • Usage-based insurance: Usage-based telematics programs track your driving habits and reward you for safe driving. You could bring down your car insurance rates if you are a cautious driver.

  • Pay-per-mile insurance: Other telematics car insurance programs base pricing on your total mileage driven. If you work from home or drive infrequently, you could save money.

  • Search for the right discounts: Discounts and discount amounts vary significantly between companies. Shop around to find the best discounts for your situation, which could include multi-vehicle, student, military or good driver discounts.

Why insurance companies check credit

Let’s make a quick distinction. The credit score you’re familiar with, which you can check through any of the three major credit bureaus, is not exactly what car insurance companies look at. Car insurance companies use a credit-based insurance score to calculate risk.

The credit scoring company FICO developed the credit-based insurance scoring model in the 1990s, and then it and other organizations subjected the score to years of testing. According to FICO, credit-based insurance models “are based on the study of millions of policies and billions of dollars in claims payments from national and regional insurance companies representing all major geographic areas and distribution systems.”

According to the Insurance Information Institute (III), multiple studies have confirmed a high correlation between the credit-based insurance rating and the ratio of claims to premiums for a person.

In other words, the studies found that people with low credit scores cost insurance companies more in claims compared to people with higher scores. According to the III, today, 95% of both home and auto insurance companies use the model to predict risk.

Credit score vs. credit-based insurance score

So what’s the difference between credit scores and credit-based insurance scores? 

Both models pull information from your credit report, but they weigh aspects slightly differently. Here’s how FICO’s credit-based insurance score and credit score compare, according to the National Association of Insurance Commissioners and FICO.

FICO Credit-Based Insurance Score Weight

FICO Credit Score Weight

Payment History

40%

35%

Outstanding Debt

30%

30%

Credit History Length

15%

15%

New Credit

10%

10%

Credit Mix

5%

10%

You can see that FICO’s credit-based insurance score puts more weight on payment history and less on credit mix. Besides this, both scores also have different ranges. FICO’s standard credit scores range from 300 to 850, while its credit-based insurance score ranges from 100 to 900, according to Experian

Credit-based insurance scores are not available to the public. However, both scores are similar in how they operate. Basically, if you have a low credit score, you also have a low credit-based insurance score. 

Which companies don’t check credit?

Whether an insurer checks credit scores will depend on the state in which you live rather than the company itself. 

Every state except California, Hawaii and Massachusetts allows companies to use credit-based insurance scores as a rate factor. If you live in one of those three states, the car insurance company is not allowed to use your credit data to set your rate. 

However, if you aren’t among the lucky few, there’s no way to know for sure how much your credit score affects what you pay for car insurance. This is because companies don’t disclose the exact factors they used to calculate rates or how much they weigh each of those factors. This is why it’s important to compare car insurance quotes from multiple providers when you shop. 

And don’t worry, checking multiple quotes won’t affect your credit score. Car insurance companies use soft inquiries when checking the credit scores of potential policyholders.

What to do if you’ve been turned down for poor credit

In some situations, you might find that car insurance companies are declining to cover you or charging you unreasonably high prices because of your poor credit. If this happens multiple times, you have the right to get car insurance through your state’s assigned risk pool. 

States require car insurance companies to take on a portion of high-risk drivers, including people with very bad credit. Each state does this differently, but you can usually work through an agent at a company that has just turned you down to access the assigned risk pool. 

Simply speak to an agent at an insurance company and tell them that you need coverage through the assigned risk pool. The agent will be able to either sell you their own high-risk insurance or connect you to another company that can provide you coverage.

How credit affects insurance costs by state

According to our estimates, drivers pay 46% to 137% more for having poor credit, depending on the state. Each state determines how its car insurance companies can set rates, including how they use a credit-based insurance score. This means having bad credit costs drivers more in some states than others.

For example, having bad credit in Georgia may raise your rates by about 63%, but having bad credit in Wisconsin can increase your rates by as much as 122%. The table below shows average rate estimates by state for a 35-year-old driver with both good and poor credit, as well as the premium increase between the two averages.*

State

Annual Cost of Car Insurance for Good Credit

Annual Cost of Car Insurance for Bad Credit

Premium Increase

Alabama

$1,478

$2,720

84%

Alaska

$1,315

$2,092

59%

Arizona

$1,658

$3,733

125%

Arkansas

$1,462

$2,694

84%

California

$2,519

$2,519

0%

Colorado

$1,688

$2,862

70%

Connecticut

$1,900

$4,056

114%

Delaware

$1,943

$3,255

68%

Florida

$2,927

$5,339

82%

Georgia

$1,587

$2,581

63%

Hawaii

$1,255

$1,255

0%

Idaho

$1,113

$2,058

85%

Illinois

$1,494

$2,594

74%

Indiana

$1,106

$1,995

80%

Iowa

$1,121

$1,975

76%

Kansas

$1,398

$2,347

68%

Kentucky

$1,843

$3,634

97%

Louisiana

$3,867

$6,955

80%

Maine

$1,013

$2,227

120%

Maryland

$1,970

$3,179

61%

Massachusetts

$2,632

$2,632

0%

Michigan

$4,430

$9,936

124%

Minnesota

$1,515

$3,107

105%

Mississippi

$1,379

$2,652

92%

Missouri

$1,763

$3,191

81%

Montana

$2,243

$3,557

59%

Nebraska

$1,394

$2,728

96%

Nevada

$2,354

$3,665

56%

New Hampshire

$1,190

$2,635

121%

New Jersey

$2,132

$4,232

99%

New Mexico

$1,385

$2,346

69%

New York

$4,048

$9,595

137%

North Carolina

$1,278

$1,863

46%

North Dakota

$1,341

$2,469

84%

Ohio

$939

$1,614

72%

Oklahoma

$1,652

$2,718

65%

Oregon

$1,302

$2,243

72%

Pennsylvania

$1,447

$2,465

70%

Rhode Island

$1,947

$3,578

84%

South Carolina

$1,610

$2,813

75%

South Dakota

$1,348

$2,733

103%

Tennessee

$1,237

$2,496

102%

Texas

$2,094

$3,422

63%

Utah

$1,463

$2,883

97%

Vermont

$1,029

$1,919

86%

Virginia

$1,109

$1,833

65%

Washington

$1,286

$2,086

62%

Washington D.C.

$1,812

$3,238

79%

West Virginia

$1,418

$2,610

84%

Wisconsin

$970

$2,150

122%

Wyoming

$1,542

$2,669

73%

Anytime you shop for car insurance, we recommend comparing multiple free quotes to find the best rates.

* Auto insurance rate estimates were generated by Quadrant Information Services.

*Data accurate at time of publication.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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