Study: Auto Insurers Make No-Credit Drivers Pay Dearly
You’re probably aware that your credit score affects how much you pay for car insurance. Now, a new study conducted by WalletHub shows just how much a lack of credit history or a low credit score could be costing you in premiums.
Based on numbers from the country’s five biggest auto insurers, the study covered all 50 states plus the District of Columbia. According to its findings, people with no credit pay an average of 67 percent more for auto insurance than people who have great credit.
The most dramatic contrast can be found in New Jersey, where drivers with no credit pay an average of 102 percent more on their premiums. Drivers in Virginia pay an average of 97 percent more. The average also tops 90 percent in Arizona, Michigan, Texas, and Wisconsin.
The best states for drivers with no credit are California, Hawaii, and Massachusetts. Each of these states bars insurers from basing drivers’ premiums on credit scores.
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Among the five insurers featured in the study, Farmers Insurance penalizes drivers with no credit the most, making them pay over twice as much as drivers with strong credit. At the other end of the spectrum, GEICO customers with no credit pay about 24 percent more. Overall, an excellent credit score can save drivers an average of 20 to 54 percent depending on the insurer.
To come up with its findings, WalletHub created a profile for two “hypothetical consumers” who were almost exactly the same. The only difference was that one had no credit history and the other had excellent credit. Then, researchers compared car insurance quotes for these consumers from the websites of GEICO, Progressive, Farmers Insurance, Allstate, and State Farm.
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News Source: WalletHub