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Credit scores impact insurance rates

June 30, 2014

Grasping the ins and outs of your auto insurance payment can be difficult. Insurers use a wide range of variables—from the type of car you drive to the state you live in—to come up with your annual premium.

The better your credit score, the less you'll likely be asked to pay on car insurance.
But, according to a new study from WalletHub.com, credit history also plays a major role in price. WalletHub.com reported that excellent credit history compared to none creates a 65 percent average variation across the nation for the cost of premiums when all other factors are the same.

The amount of swaying power that your credit score has on insurance rates can also vary between providers. The report stated that Allstate prioritizes credit scores the most with a varying rate of 116 percent due to credit data. By comparison, State Farm had a credit data variation of 45 percent?

Automobile owners looking to save money with a proper insurance plan should consider the offerings of SelectQuote Auto & Home, which compares prices and plans from a dozen of the nation's most renowned insurance providers.

Geography matters

Your credit score can also play a bigger role in your insurance costs depending on which state you live in.

While there is no difference in prices in California, Hawaii or Massachusetts, insurance premiums fluctuated 126 percent in Washington, D.C., which was the highest of any place in the U.S. California, Hawaii and Massachusetts had no variation in price because those three states do not allow credit scores to be included in insurance variables.

Meanwhile, Vermont had the lowest difference in premiums—among states that allowed credit score variables—at 18 percent. In Wisconsin, the average driver with no credit pays 80 percent more than a person with an excellent credit score.