Writer: Steve Dinnen
You drive a nice car. And you have a wreck of a credit score. That means you’ll pay more for auto insurance, perhaps as much as 80% more in Iowa.
Auto insurers say there is a correlation between a low credit score and the likelihood that you’ll file a claim. Precisely what’s behind that cause-and-effect equation isn’t known, but they say it exists. In Iowa and 46 other states, credit scores can be taken into account when an insurer is figuring how much to charge you.
WalletHub looked at five of the nation’s largest insurers late last year and saw that, on average, someone with no credit score will pay 67% more than someone with an excellent credit score (above 781; the highest score is 850). In Iowa, the average is 42% higher, though it can range from zero (not all insurers use credit scores) to as high as 80%.
Consumer groups decry the murkiness of the scoring system as it relates to insurance and say it just replaces banned underwriting tools such as race or residence. But as of now it’s legal. Your end run around it will be to boost your score.