Revealed: states where drivers with no credit pay more for auto insurance

Revealed: states where drivers with no credit pay more for auto insurance | Insurance Business

Revealed: states where drivers with no credit pay more for auto insurance

Drivers with no credit history – or a poor credit history – could be paying more than double the amount they would otherwise for auto insurance, according to a new study from ValuePenguin.

The study found that insurers charged an average of 58% more for auto insurance for drivers who have no credit history or a poor credit history. And depending on where the drivers live, that figure can be even higher.

Michigan topped the list of states where drivers with poor or no credit paid more, according to ValuePenguin. The average annual cost of auto insurance for Michigan drivers with excellent credit is $1,341. For drivers with poor credit, it’s $5,282 – nearly four times as much. In Minnesota, drivers with excellent credit pay an average of $477 annually for car insurance, while drivers with poor credit pay more than twice as much at $983.

The top 10 states where drivers with poor or no credit histories pay more for auto insurance are:

  1. Michigan
  2. Minnesota
  3. Utah
  4. Texas
  5. Georgia
  6. Arizona
  7. Kentucky
  8. Missouri
  9. Florida
  10. New York

In general, insurers charge higher rates depending on credit history. However, three states – California, Hawaii and Massachusetts – have prohibited the use of credit ratings in the calculation of car insurance rates.

In 2019, Rep. Rashida Tlaib (D-Mich.) sponsored a bill to nationally prohibit the use of credit scores in calculating auto insurance rates. The debate over whether credit-based pricing should be prohibited federally is still ongoing.