Yes, credit affects car insurance premiums in every state except for California, Hawaii, and Massachusetts. Car insurance companies use credit score as one factor in determining premiums because credit history correlates with a driver's likelihood of filing a claim. Insurance companies do not use a consumer's standard credit score, though. Instead, they look at a driver's auto insurance score, which is based on the same information as a credit score, like payment history and debt.
Roughly 95% of personal car insurance companies use auto insurance scores when calculating premiums, according to FICO. People with no credit history pay an average of 67% more for auto insurance than drivers with excellent credit as a result. However, insurance companies consider factors besides credit as well. Your driving record, age, vehicle, and location can all affect your premium, too.
It’s also important to realize that you are still protected from unfair practices, even when car insurance companies are allowed to use credit in your state. For instance:
- Insurance companies in most states are not allowed to deny coverage simply because of an insurance score.
- Many states allow drivers to request that their insurance score not be considered if it was negatively affected by a major life event like a divorce, a death in the family, or an involuntary job loss. If your state has such laws, your insurance company is required to comply.
Finally, the fact that credit scores and insurance scores are based on similar information means that credit-score improvement can result in cheaper car insurance premiums, too. You can check your latest credit score for free with WalletHub and get customized advice for how to improve your credit.
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