Filed Under:Claims, Auto

Drivers with no credit can pay up to 113% more on auto insurance

WalletHub research finds the link between credit scores and auto premiums

Customers with no credit can pay up to 113% more on auto insurance. (Photo: Shutterstock)
Customers with no credit can pay up to 113% more on auto insurance. (Photo: Shutterstock)

Is there a connection between credit scores and auto insurance? According to WalletHub’s research, there is.

Related: Top 5 states for car insurance savings

In its 2017 Auto Insurance & Credit Score Report, WalletHub compared the cost of policies in all 50 states and the District of Columbia from five of the largest auto insurance companies in the U.S. for a pair of hypothetical applicants who are identical save for their credit standing: One has excellent credit, and the other has no credit. WalletHub also examined how transparent the major car insurance companies are regarding their use of credit data and where they get it.

See the chart below for the exact parameters WalletHub used for its base case driver and auto coverage:

Related: Auto premium increases put strain on insurers' customer satisfaction

(Photo: Shutterstock)

No credit means higher premiums

According to the report, on average people with no credit pay 65% more for auto insurance than people with excellent credit. In Pennsylvania, New Jersey and Michigan, drivers with no credit pay twice as much, with premiums fluctuating 113%, 100% and 105% respectively.

Among the five companies studied (Geico, Progressive, State Farm, Allstate and Farmers Insurance), Farmers seems most reliant on credit data, with those with no credit paying over twice as much (102% more) as excellent-credit customers. Customers with no credit pay on average 40% more with Geico, 55% with Progressive, 58% with State Farm and 79% more with Allstate.

Related: 20 best car insurance companies of 2016 ranked by consumers

On average, the five major auto insurance companies studied use credit data in 90% of the states in which they operate. Progressive uses credit data in all of the states it serves.

The chart below shows how much excellent credit can save customers on auto insurance:

Related: Personal auto policies: 5 questions agents should ask buyers

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