By Alina Comoreanu
Senior Researcher, WalletHub

(August 15, 2018) Everyone knows you need auto insurance to drive. It’s the law, everywhere but New Hampshire. We also know that our credit scores dictate what types of credit cards and loans we can get. But most of us are in the dark about to the connection between credit scores and car insurance.

So WalletHub set out to see just how much credit data affects the cost of insurance policies in each of the 50 states and the District of Columbia.

We did so by comparing the cost of policies from five of the country’s largest auto insurance companies for a pair of hypothetical applicants who are identical save for their credit standing: One has excellent credit, and the other has no credit. We also examined how transparent the major car insurance companies are regarding their use of credit data and where they get it.




Key Findings

People with no credit pay 67% more for car insurance than people with excellent credit, on average. Drivers with no credit pay at least twice as much in N.J.

Farmers Insurance seems most reliant on credit data, with credit newcomers paying over twice as much as excellent-credit customers. Even GEICO (least reliant) has a 24% penalty.



Farmers Insurance seems most reliant on credit data, with credit newcomers paying over twice as much as excellent-credit customers. Even GEICO (least reliant) has a 24% penalty.

To recap, here’s a quick overview of how much excellent credit can save you on car insurance:



Methodology

In order to determine the impact of consumer credit data on car insurance premiums, we collected premium quotes from the websites of five of the largest insurance providers in the United States, based on the total number of insurance premiums issued, according to SNL Financial. In light of the fact that insurers use numerous variables in pricing their policies, we obtained quotes for two hypothetical consumers, identical save only for their credit history. More specifically, one consumer has excellent credit while the other has no credit history

Our base case, also referred to as the “WalletHub Scenario” in this report, assumes the following details about the driver and the automobile:



The insurance coverage details were used as guidelines, as different states have different requirements. Where we were unable to match the coverage details to the above specifications, we chose the value closest to our base case data, or the cheapest option for the coverage limits that were available. State specific and other miscellaneous taxes have been included in the quote as needed.

In order to receive a quote from the insurance provider websites, a specific zip code was required. For each state in which the company was active, we chose zip codes where the average household income was closest to the average income for the state as a whole. Data was collected from July 13 – Aug. 6, 2018.