Poor credit raises car insurance more than DUI
LOUISVILLE, KY (WAVE) - Is bad credit worse than a DUI? When it comes to car insurance rates, the answer might be yes.
Consumer Reports' two-year investigation found that many major insurance companies base their prices in part on a hidden credit score that can take into account things like what type of credit card you have or whether you've applied for credit recently.Researchers reviewed price quotes from companies including Allstate, GEICO, Progressive and State Farm.
That car insurance credit score is different from your FICO score, and how it figures into your premiums varies depending on the insurer and your state. Companies use it to predict not whether you'll be a good driver but whether you're likely to file a claim.
[EXTRA: Names, numbers of credit reporting agencies]
Consumer Reports compared rates for hypothetical drivers who are single with clean driving records. Consistently, people with a "good" credit score paid $68 to $526 more than those with scores of "excellent."
In Florida, the average annual premium for those with an excellent car insurance credit score is about $1,400. With just a "good" score, it is more than $1,700, and with a poor score, more than $3,800. That's a much higher premium than for those with an excellent score and a drunk-driving conviction.
In Kentucky, the average annual premium for those with an excellent car insurance credit score is about $1,400. With just a "good" score, it is more than $1,700, and with a poor score, almost $3,700. That's a much higher premium in the Bluegrass state than for those with an excellent score and a drunk-driving conviction.
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Consumer Reports research shows that some insurers penalize you more for a poor credit score than others. For those drivers in Kentucky with a poor score, SAFECO insurance charges $4,900, but GEICO charges $2,800. So GEICO is a better choice if you have a poor score here.
By comparison, for drivers in Florida with a poor score, Amica Mutual charges $7,200, but GEICO charges $2,300. So GEICO is the better choice if you have a poor score in Florida.
A few states prohibit insurers from setting prices based on credit scores, but not Kentucky or Indiana.
California, Massachusetts and Hawaii prohibit insurers from setting prices based on credit scores. Insurance premiums in those three states are based much more on how people actually drive, which Consumer Reports says is much more fair. But it does mean that if you have an accident in those states, your rates could go up higher than elsewhere.
If you suspect that your car insurance company has given you a low score, ask the major credit bureaus: TransUnion, Experian and Equifax, for your credit report and correct any inaccuracies. That may help improve the score the insurance companies use. You can get your free credit report at annualcreditreport.com.
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