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.
You can find the results, plus our complete methodology, below.
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 NJ.
*“Premium Fluctuation” refers to the additional amount people with no credit pay relative to those with excellent credit.
How Credit Score Affects Car Insurance by State:
|State||Average Premium Fluctuation||Min. Premium Fluctuation||Max. Premium Fluctuation|
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.
*Averages reflect quotes for the WalletHub Scenario. States in which credit score is not used have been excluded.
The five major auto insurance companies use credit data in 81% of the states in which they operate, on average.
Travelers is the most transparent about its use of credit data, providing a clear disclosure when generating quotes.
*For information about how transparency was evaluated, see the Methodology section of this report.
Finally, just to recap, here’s a quick overview of how much excellent credit can save you on car insurance:
How Credit Scores Affect Car Insurance by Company:
|Car Insurance Company||How Much Excellent Credit Saves You|
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:
Uninsured Motorist Coverage of $50,000 (where available)
|Marital Status and Gender: Single Male|
|Age: 40 Years|
|Licensed: 24 Years|
|Employment Status/ Profession: Job that is not eligible for discounts|
|Membership in organization: No membership|
|Annual Mileage: 16,000|
|Vehicle: 2012 Honda Accord LX, 4 cyl., Sedan
Assume driver side air bag, standard performance, no anti-theft device.
|Bodily Injury Liability coverage of $50,000/$100,000|
|Property Damage Liability of $50,000|
|Minimum Personal Injury Protection or MedPay coverage in states where required|
|Underinsured Motorist Coverage of $50,000 (where available)|
|Collision with deductible of $1,000|
|Comprehensive with deductible of $1,000|
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 – August 6, 2018.
Insurance Provider Credit Use Transparency
We also evaluated the top 10 insurance companies in the in order to determine how transparent each company is about the use of consumer credit information in their pricing policies. We reviewed each company’s website based on the following criteria:
A. How easy is it for a consumer to find out if the insurance provider is accessing their credit information and using it to provide pricing information? This question is worth 5 points total, and we scored it based on 2 dimensions: location of information and how prominent it is. If the information could not be located, no points were given.
Based on location:
1 point - If information is found on the first page of the quoting process.
0.5 points - If information is found on a subsequent page of the quoting process.
Based on how prominent the information is:
4 points - Prominent and normal size font.
3 points - Prominent and small size font.
2 points - Prominent accompanied by a pop-up/expanding section.
1 point - Not prominent.
B. How easy is it for a consumer to determine which credit reporting agency credit data is being requested from? This question is worth 5 points total.
5 points - Information can be found on site and is a part of the quoting process.
4 points - Information can be found on the site, but needs to be searched for outside of the quoting process.
2 points - Information can be obtained through customer service lines.
1 point - Information is provided by the Public Relations department.
0 points - Information is not present on the website, cannot be obtained through customer lines or from the Public Relations department.