Everybody knows that if you’re a good driver, you’ll pay less for car insurance than a person with a history of fender benders. But there’s another less obvious factor that dictates your car insurance rates: your credit score.
New research from Carinsurance.com shows that your score has a major impact on your car insurance premiums. Drivers with scores of 750 or higher pay an average of $783 less per year for insurance than people with lower scores. If you keep your credit score above that threshold from age of 25 to 65, you’ll save $22,815. That’s enough for a whole new car!
Consider this: The average driver in the 25-to-34 age bracket pays $1,938 in car insurance annually. For drivers with scores over 750, the average drops to $1,155. Conversely, if your credit score is between 500 and 649, that average rate will rise to $2,023.
CarInsurance.com studied nearly 43,000 auto insurance quotes for single-driver policies including comprehensive and collision coverage to come up with these figures. Quotes indicating a checkered driving history (accidents, tickets) were excluded.
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Some people don’t think it’s fair that an insurance company can use your credit score — nominally a predictor of financial risk — to determine how you’re going to behave behind the wheel. According to CarInsurance.com, Massachusetts, California and Hawaii feel the same way, because they prohibit insurance companies from using a person’s credit score in his or her insurance quote. In the rest of the country, though, your financial history is fair game. According to research firm Conning & Co., 92 percent of insurers take your credit score into account when figuring out how much to charge you.
Of course, your driving history, where you live, and the type of car you drive also play a role in determining how much you’ll pay for car insurance. But all of these particulars are either difficult or impossible to change, whereas increasing your credit score is something you can start any time.
