The cost of car insurance is a greater factor than ever when trying to fit the cost of a new car into your budget. After spending hours researching the ideal car to purchase, it’s not time to power down the laptop. Now to the task of finding the best insurance coverage. But as you compare coverage and premiums, be aware, getting car insurance may not be super-simple if you have zero (or less-than-stellar) credit.
The researchers at WalletHub released a new report detailing how tough it can be to get good rates on insurance if you have no credit — something that car buyers may overlook when they visit a dealership.
In the 2018 Credit Scores & Auto Insurance Report, finance experts examined to what extent major auto insurers use credit data when pricing policies. They found that on average, people with no credit pay 67 percent more for car insurance than people with excellent credit. On average, those with no credit history fork over at least twice as much in New Jersey, and and nearly twice as much in several states including Arizona, Colorado, Michigan, Texas and Wisconsin.
Only in Hawaii and Massachusettes are consumers not penalized for their credit scores when buying car insurance.
WalletHub looked at the five main insurance companies: GEICO, Progressive, State Farm, Allstate and Farmers Insurance. On average, these companies use credit data in 81% of the states in which they operate. (Delete!)Only Progressive uses credit data in all of the states it serves.
As for who depends on credit the most? Farmers Insurance appears to be most reliant on credit data, with credit newcomers paying over twice as much as customers with excellent credit. GEICO is least reliant with an average 24-percent penalty.
Travelers is the most transparent about its use of credit data, as it provides a clear disclosure when generating quotes.
Here is a breakdown showing how much top-notch credit saves you on insurance:
GEICO offers would-be customers with excellent credit a savings of 20 percent; you’d save 43 percent at Progressive; 44 percent at State Farm, 44% at Allstate and a hefty 54% at Farmers Insurance.
Researching your next vehicle isn’t just about gas mileage, safety ratings and affordability anymore. Factoring in car insurance and how your credit stacks up may take a little extra time, too.