If you want to legally drive a car in the United States, you have to have car insurance. It really is that simple. That requirement is universal throughout the country, however the cost of car insurance is not. Most people are aware of many of the factors that go into calculating car insurance rates—driving history, type of car, amount you drive etc. However, what many people don’t realize is that their credit score can also have a profound impact on the cost of their car insurance policy. The trick is, it also may not. A new study makes it clear that that is entirely dependent on the state in which you reside.
WalletHub recently conducted a study looking at how credit affects car insurance costs across all 50 states. Their results are likely surprising too many. As it turns out, the state in which you live has a drastic impact on your car insurance costs. These are the top ten states where credit scores affect your insurance costs the most:
– New Jersey
The weight your credit score has on your car insurance varies by state, with New Jersey being the worst by far. New Jersey drivers with poor credit pay about twice as much as a driver with a good credit score. As you move down the list the impact lessens, but is certainly still there.
For consumers, looking at credit scores to determine auto-insurance rates can feel a bit unfair. For insurers, however, it makes total sense. Remember, insurance companies use big-data to establish a pattern of behavior for their clients. That pattern informs how big of a risk the company thinks you are. When it comes to credit score, insurers are looking to try to gauge how responsible a person is. Someone with a low credit score might be more likely to miss monthly payments etc.
As a consumer, you should always do your due diligence and shop around before making a big decision, like purchasing an insurance policy. This becomes all the more apparent when you consider that the amount your credit score impacted your insurance policy varied, not only by state, but also by insurer, according to this study.
The study methodology was fairly straightforward and described in the study itself:
“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.”.
If you are shopping for car insurance, be sure to check your credit score! Particularly if you live in one of the ten states we listed above. If you are looking for a new policy, or maybe to upgrade your current one, we encourage you to reach out to the folks over at TGS Insurance. The TGS staff are experts in car insurance and are always willing to work with you to find the right policy for your lifestyle, and your budget. Visit www.tgsinsurance.com to learn more.