What makes your car cost so high
Poor credit raises your car insurance cost, drivers who have poor credit history pay more than drivers who have a good credit record. Car loans and higher premium rates increase your car cost. If you have a spotty credit record and violations in your driving record then it raises your car insurance cost.
Credit record and car loans
The good credit limit is between 685-725 and poor credit is considered below 640. But sometimes, subprime is the credit between 510-608 and prime credit is between 670- 790. If you buy a car on a loan with a poor credit record even if the car is cheap, it costs you more on the insurance.
MyMoneyMyQuotes team has collected the data of buyers of prime credit who got an average rate of 5.90% for used car loans from September to December in the year 2017 and the average rate received by subprime credit buyers is 16.00%.
On the basis of average rates mentioned above, a borrower needs to pay the following amounts if he/she bought a used car from a loan amount of $20000 in the 4th year.
- prime credit costs around $500 per month and around $2500 in total interest.
- subprime credit costs around $550 per month and around $7700 in total interest.
According to this poor credit costs around $115 per month and $5280 for the time period of 4 years.
Method to take a loan for a longer time
Long term loans help to lower the monthly payments of loans. For this reason, a little less than half of the residents in the USA, prefer long term loans to short term loans.
The amount of poor credit becomes $8400 and $125 per month if the loan term exceeds over 6 years.
Credit scores for insurance:
Credit scores are different for loan terms and insurance premiums. Credit scores that a lender considers at the time of deciding the loan terms and credit scores used by the insurer at the time of deciding the car insurance premiums are not the same.
But in all states law prohibits the insurers to consider credit scores while deciding the insurance rates but it does not apply to the three states only ( Hawaii, Massachusetts, and California).
MyMoneyMyQuotes team has found the data of drivers with blemished credit history and good credit history spotless driving history and averaged the car insurance rates from different states and ranked according to the prices set by the state.
By comparing the insurance quotes from different companies and found that poor credit costs higher than good credit with violations in the driving record. Drivers who have good credit but only one accident in their driving record can find $491 cheaper insurance than drivers with poor credit records. So, poor credit makes car costs high.
Car insurance rates vary widely
We collected the data of Michigan drivers and found that a driver with poor credit pays at least $450 more to purchase car insurance in a month than a driver with good credit but a spotty driving record. On the other hand, in Kentucky, drivers with poor credit pay around $195 more than drivers with good credit records per month.
In North Carolina and Iowa, the situation is totally opposite. In North Carolina drivers with poor credit, record pays $25 less than the drivers with good credit records. Car insurance in Iowa for drivers with poor credit is $40 cheaper than the drivers with good credit history.
Avoid paying high auto insurance premiums
To get the best auto insurance policy at lower rates, take approvals for car loans, and also check your credit scores. You can get a loan right away because pre-approval of the loan helps to get better insurance rates from the insurer.
You can also buy cheap insurance policies with poor credit records by comparing the quotes from different insurers available in the market. There are big differences between the highest and lowest insurance quotes.
There are different ways to brush up your poor credit record and to raise your credit scores such as:
- By paying all your bills on time.
- Maintain a credit card balance below 35% of your credit limit.