- An insurance company study found that consumers with lower credit scores tended to be riskier drivers and filed more claims, leading most states to allow credit scores to be a factor in determining car insurance rates. - A few states (California, Massachusetts, and Hawaii) have banned the use of credit scores in car insurance rates, finding the practice unfairly discriminates against low-income groups. - How much a particular insurance company considers credit history varies significantly, with some seeing over a 100% premium difference between good and poor credit, while others see a smaller difference.

1. How your credit history affects your car insurance rates
Some insurance companies are more upfront about their use of credit data in setting rates.
Progressive, for example, was found to be the most transparent, scoring a perfect 10 in that
category. Liberty Mutual was the lowest-scoring provider, logging a rating of 4.5.
A 2007 study by the Federal Trade Commission (FTC) found pretty much the same thing, drawing a
strong reaction from a number of consumer groups. They cited other studies that found tying
insurance rates to credit scores tends to discriminates against low income and minority consumers
because of the racial and economic disparities inherent in scoring.
Transparency
Back to esurance's point that companies don't use your credit score but use the data to create their
own insurance credit score. That's technically true and may explain why there appears to be such a
variation of rates in the WalletHub study.
According to esurance, a web-based insurance provider, the practice stems from a 2003 study by
researchers at the University of Texas. They found that consumers with lower credit scores tended
to be involved in more car insurance losses and higher claims - meaning they were a greater risk.
Among the five insurance companies Allstate appeared to rely most on credit history. The study
found a 116% swing in premiums between the good credit/no credit consumers.
The financial website WalletHub.com said it obtained quotes from five of the largest car insurance
providers for two hypothetical consumers - one with good credit and one with no credit history.
What did it find?
3 states ban it

2. If you're paying more for car insurance and have had no accident or tickets, maybe you should check
your credit score. In all but a handful of states, your credit history is part of the formula used to set
your rate.
Whether or not you think that's fair, it's a fact of life, to one extent or another, in all but 3 states.
Your best defense is to try to improve your credit score if you have a less than stellar record. Or
move to California, Massachusetts or Hawaii.
If you think that linking credit histories to insurance rates doesn't seem fair, the state legislatures in
California, Hawaii, and Massachusetts agree. They have passed laws preventing insurance
companies from using credit scores - or "credit-based insurance scores," as esurance calls them - as
part of the rate formula.
Some insurance companies weight this credit data more heavily than others, so a consumer with a
spotty credit record would want to avoid companies that place a lot of stock in credit history and go
with one where it seems to matter less.
According to Credit Karma, different companies calculate their scores in different ways. But the
bottom line - with most companies your credit history is a significant factor in determining your rate,
sometimes just as important as your driving record.
At the other end of the scale, State Farm appeared to rely least on credit history. The difference was
still significant, but was only 45%.
The differential differs state to state. In the average state the study found a 65% differential in the
cost of car insurance premiums for a person with an excellent credit score and a person with no
credit history.