Does having no credit at all affect your car insurance?

How does it affect your rates if you have no credit at all? Not a poor credit score, but just none. I didn't want any debt, and about 25 years ago, I paid off all of my credit cards and closed the accounts, which now I know is a mistake if you ever want credit again. Would it help to attempt to rebuild my credit and obtain a credit score?

Good question, and it's a common misconception that no credit is treated the same as neutral or average credit. Unfortunately, that's usually not the case: most insurers, including in Arizona, view a blank credit file similarly to a low or "fair" credit score rather than a clean slate, since they don't have any history to indicate how you manage financial risk. However, having no credit history typically doesn't hurt as much as having a poor credit score with missed payments or collections on it. Credit scores can impact your car insurance (in most states) more than people usually realize.

To answer your other question directly: yes, it's probably worth rebuilding your credit and establishing a score. Although it's hard to know exactly how much it might save you on your current rate, it's probably worthwhile to get something built up again. Even a basic credit file (something as simple as one credit card used lightly and paid on time every month) can move you into a better rating tier than having no file at all. It doesn't have to be an extensive credit history to help. Insurance companies are mainly looking for some usable data.

In the meantime, there are some options to look into for to help with your rate while you're building that credit. Ask your agent whether your insurer offers usage-based or telematics programs (these track your actual driving habits and can offer a discount regardless of your credit, as long as you're generally a good driver). If you've got both home and auto, ask about a bundling discount, whether with your current insurer or a new one. And speaker of new insurers, don't forget to shop around every once in a while (I usually recommend twice a year). This is the best way to save: compare multiple insurance companies and see who can give you a better rate for the coverage/products you need, since not every company weighs credit the same way. If you want some help with the legwork, our agents are happy to shop around for you! Give us a call or start online whenever you're ready. I hope this helps!