How Much Influence Does Credit Score Have on Your Car Insurance Bill?

NEW YORK (MainStreet) — Premiums for your car insurance can vary widely depending on how much your company uses credit scores to determine them.

While all insurance companies examine your credit score to determine your premium as part of their assessment of your risk, some of them place a greater weight in it.

Allstate appears to utilize credit data the most, according to an analysis by WalletHub, the Washington, D.C.-based personal finance social network. The company's research showed that there can be a 116% fluctuation in premiums between a consumer with excellent credit and a consumer with bad credit. On the flip side, State Farm seems to rely on credit data the least, displaying only a 45% premium fluctuation.

"The research found a strong correlation between credit scores and claims and people with better credit scores are less likely to get in an accident and file claim," said Odysseas Papadimitriou, CEO of WalletHub. "I was surprised by how much the companies rely on credit."

In its research, WalletHub obtained quotes from five of the largest auto insurance providers in the U.S. for two hypothetical consumers who have identical profiles except one person has excellent credit while the other has no credit. By isolating the role of credit data, it demonstrated the fluctuation in insurance premiums.

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Credit data has the least impact on insurance premiums in Vermont which only had an 18% fluctuation while the District of Columbia had the largest amount of change with a 126% fluctuation. Since insurance is regulated at the state level and each one has different rules about how and if credit is used and how often and what percent premiums can be raised, prices can vary greatly.