Depending on Your State, Your Credit History Could be Driving the Cost of Your Auto Premiums

Got bad credit? You could be paying twice as much for car insurance than if you had top-notch credit—even if your driving record is stellar. And it's not just a problem for people with bad credit: The outright lack of a credit file also can push you into higher premiums.

Just ask Donald Tonack. Despite a pristine driving record—he and his wife have never had an accident—and years of timely bill payments with zero claims, his insurer raised his premium by 11% a few years ago because, the company told him, he had no credit history.

Mr. Tonack and his wife, residents of Lebanon, Ore., say they've always paid for just about everything in cash. "I've never made a late payment in my life," says Mr. Tonack, a 76-year-old retiree and pastor—and a former insurance underwriter. "We were probably the best risk they had on the books."

A recent study of five large car insurers by WalletHub.com found wide variations in rates quoted online for two hypothetical people, identical except that one had excellent credit and the other had no credit.

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Model Drivers

In the study's scenario—two 36-year-old, unemployed men, each driving a 2008 Honda Accord—the man with no credit faced premiums 65% higher on average nationwide than the man with good credit.

That differential was highest in Washington, D.C. (126%) and lowest (18%) in Vermont. (The study assumes the men live in a ZIP Code with each state's median income.) California, Massachusetts and Hawaii showed no differential; they prohibit the use of consumer credit histories in setting car-insurance rates

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