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Steven Gursten
Steven Gursten
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How does your credit score affect the price you pay for car insurance?

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New study shows Allstate charges 116% more to consumers with poor credit; other large insurers charge more too

credit scoring

Do you know how your credit score affects the price you pay for auto insurance? It’s common practice for auto insurance companies to use drivers’ credit information as factors in determining how much to charge for auto insurance. This is called credit scoring.

Now, a recent study confirms that if you have a low credit score, you will most definitely pay more.

According to the “2014 Car Insurance by Credit Score Report” by a consumer website called WalletHub, four of the largest auto insurance companies in the country  – Allstate, Farmers, Progressive and State Farm – charge considerably more to consumers with poor credit.

In its study, WalletHub made the following disturbing findings about how credit scores affect insurance pricing:

  • Allstate had “a 116% fluctuation in premiums between a consumer with excellent credit and a consumer with no credit.”
  • Farmers’s premium fluctuation between consumers with excellent credit and no credit was about 80%.
  • Progressive’s premium fluctuation between consumers with excellent credit and no credit was about 48%.
  • State Farm had a “45% premium fluctuation” between a consumer with excellent credit one with no credit.”

To conduct its study, WalletHub collected premium quotes from the insurer websites for two hypothetical consumers: one with excellent credit and the other with no credit history.

Last week, I was interviewed by Bloomberg News on the auto insurance crisis in Detroit, where residents cannot afford among the highest prices in the country. And so they go uninsured and are vulnerable to immense risks and penalties if they’re in an accident.  I’ve been outspoken on this issue, and I explained to the reporter how credit scoring is a double whammy for people who live in impoverished cities like Detroit.

Credit scoring is legalized discrimination.

Related information:

Why State Farm, Allstate will charge you more if you have a poor credit score