How will your credit score impact your car insurance rate? What Factors Into a Car Insurance Rate?
Question:
How will your credit score impact your car insurance rate?
What Factors Into a Car Insurance Rate? IS THIS INTERESTING????
Obviously, your driving record has an impact on the estimated risk your insurance company assumes by taking you on as a driver. There also are other risk elements that affect your car insurance, according to the Insurance Information InstituteLinks to an external site.: where you park your car at night, your gender, your age and the kind of car you drive. Also relevant to your rate, according to insurance companies, is your credit score.
The practice of using credit scores in setting insurance rates has been around for at least 20 years. According to at least two studies, a 2003 studyLinks to an external site. done at the McCombs School of Business at the University of Texas at Austin, and a 2007 studyLinks to an external site. by the Federal Trade Commission, there is a statistical correlation between how much a consumer costs an insurance company and that customer's credit score.
Source: https://www.edmunds.com/auto-insurance/does-your-credit-score-affect-your-car-insurance-rate.htmlLinks to an external site.
Everyone knows you need auto insurance to drive. It's the law, everywhere but New HampshireLinks to an external site.. We also know that our credit scores dictate what types of credit cards and loans we can get. But most of usLinks to an external site. 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.
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 NJ.
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*"Premium Fluctuation" refers to the additional amount people with no credit pay relative to those with excellent credit.
EMBED ON YOUR WEBSITELinks to an external site.
How Credit Score Affects Car Insurance by State:
State | Average Premium Fluctuation | Min. Premium Fluctuation | Max. Premium Fluctuation |
---|---|---|---|
AK | 28% | 0% | 64% |
AL | 71% | 0% | 116% |
AR | 62% | 0% | 131% |
AZ | 91% | 33% | 127% |
CA | 0% | 0% | 0% |
CO | 87% | 0% | 161% |
CT | 62% | 0% | 123% |
DC | 69% | 0% | 212% |
DE | 75% | 62% | 103% |
FL | 54% | 0% | 111% |
GA | 84% | 0% | 138% |
HI | 0% | 0% | 0% |
IA | 42% | 0% | 80% |
ID | 57% | 0% | 133% |
IL | 74% | 1% | 139% |
IN | 54% | 0% | 133% |
KS | 44% | 0% | 76% |
KY | 52% | 0% | 155% |
LA | 60% | 0% | 135% |
MA | 0% | 0% | 0% |
MD | 41% | 2% | 95% |
ME | 65% | 0% | 126% |
MI | 92% | 85% | 113% |
MN | 87% | 0% | 186% |
MO | 87% | 0% | 138% |
MS | 67% | 0% | 151% |
MT | 27% | 0% | 54% |
NC | 42% | 0% | 107% |
ND | 79% | 0% | 157% |
NE | 84% | 68% | 134% |
NH | 69% | 7% | 169% |
NJ | 102% | 60% | 139% |
NM | 37% | 0% | 79% |
NV | 42% | 0% | 69% |
NY | 47% | 0% | 136% |
OH | 83% | 0% | 133% |
OK | 78% | 0% | 138% |
OR | 83% | 5% | 160% |
PA | 89% | 0% | 164% |
RI | 41% | 0% | 127% |
SC | 57% | 27% | 87% |
SD | 67% | 0% | 133% |
TN | 88% | 0% | 124% |
TX | 91% | 35% | 129% |
UT | 77% | 0% | 147% |
VA | 97% | 55% | 162% |
VT | 47% | 0% | 155% |
WA | 50% | 0% | 94% |
WI | 91% | 46% | 143% |
WV | 52% | 0% | 126% |
WY | 69% | 0% | 151% |
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.
ANSWER THESE TWO QUESTIONS FROM THE INFORMATION ABOVE
1. Find out if the company you get your car insurance through uses your credit score to establish your premium. You can call and ask them or do some searching online to find out.
2. Prepare a brief 2 paragraph reflection to let me know what you think about this practice.
Organizational Behaviour Concepts Controversies Applications
ISBN: 978-0132310314
6th Canadian Edition
Authors: Nancy Langton, Stephen P. Robbins, Timothy A. Judge, Katherine Breward