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Research and Statistics

Less-than-stellar credit can drive up your car insurance rate

Summary

Residents of some states may pay double or triple for auto insurance if they have poor credit, compared to drivers with excellent credit

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For many Americans, watching and boosting your credit score brings to mind credit card and loan applications. But a less-than-stellar score can also drive your auto insurance rates higher, with residents of some states being hit harder than others.

Insurance comparison site InsuranceQuotes.com studied the difference in auto premiums between a hypothetical applicant with excellent credit versus applicants with fair or poor credit across the 47 states where linking credit scores to auto insurance rates is allowed.

On a nationwide basis, a fair credit-based insurance score – which is slightly different from a standard credit score – can result in you paying 28 percent more than if you have excellent credit. And if your score is poor, your rate could double – up 103 percent.

But not all states’ rates are calculated according to the same formula, so the premium someone pays for bad credit in one state could be drastically different from premiums in other states.

See related: Millennials taking their credit building seriously

Take Michigan and Utah, for example. Compared to an excellent-credit applicant, one with poor credit will pay more than triple for the same auto insurance policy. Those two states top the list for the biggest hit, but Alabama, Nevada and Delaware also deal a pretty big blow to those with fair and poor credit.

At the other end of the rankings, North Carolinians and Virginians suffer the least, with rates hiking 75 to 76 percent for poor credit. But that’s approaching double the premium, so it’s a stiff hit nonetheless. Residents from Wyoming, Alaska and New York rounded out the bottom five.

Three states – California, Massachusetts and Hawaii – were not included in the study, as insurers in those states are prohibited by law from calculating auto insurance rates based on credit scores.

InsuranceQuotes worked with Quadrant Information Services to examine credit-based insurance scores’ average impact on auto insurance rates using a hypothetical 45-year-old, married female driver with a bachelor’s degree and no prior claims or lapses in coverage. Its full state-by-state report was released Aug. 23.

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Credit Card Rate Report Updated: May 23rd, 2019
Business
15.61%
Airline
17.50%
Cash Back
17.60%
Reward
17.62%
Student
17.79%

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