Credit scores often impact auto insurance as well as borrowing terms

10.31.09
By Nicholas Storie

Millions of Americans struggle daily to make ends meet and to get their credit scores to a point where they can secure more favorable borrowing terms.

However, some people may be dismayed to learn that their credit score can also affect how much money they pay for auto insurance. The practice has drawn controversy in a variety of states, but remains fairly common nationwide.

The financial ramifications can be significant for those with low credit scores. For example, a recent Dallas Morning News report noted that people in North Texas with insufficient scores can find themselves paying 35 percent more on their policies than those with better credit.

The newspaper noted that this trend also applies to home insurance companies, and that those with low scores can occasionally pay more than twice as much on their premiums.

Some lawmakers have been targeting the practice but with few significant results so far. For example, State Representative Jesse White of Pennsylvania recently re-introduced a bill to end the use of credit scores for auto insurance pricing after failing to advance it in the last session.

Michigan's insurance office also took a stand against the practice earlier this year, but little came of the effort. Until broader changes are forthcoming, consumers have one more reason to focus on boosting their credit score.

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A poor credit score can result in high auto insurance rates.