Poor credit scores increase auto insurance rates in Texas

Texas residents may not realize how much their credit scores impact their auto insurance rates. However, the truth is that a weak credit rating can raise the cost of auto insurance more than a drunk driving conviction in the Lone Star State, according to Consumer Reports. Those who live in big cities such may see hikes in their premiums of auto insurance Houston be impacted the most as it is a major city in Texas.

Most states allow auto insurance companies to use credit scores to set rates. The companies claim that a person’s credit history is a better indicator of future claims than their driving record. They claim it is no different than using an individual’s gender, age or marital status when pricing quotes. While consumer advocates have long argued against the practice, many insurance regulators and insurance groups have sided with auto insurance companies.

Consumer Reports recently analyzed just how much credit scoring raises auto insurance rates, and the results were shocking. The magazine examined over 2 billion auto insurance quotes from every area of the United States and found that Texas consumers pay a particularly high price for poor credit.

For example, a single adult with a good driving record and excellent credit pays around $1,338 per year in Texas. Meanwhile, a single adult with a good driving record and poor credit pays a whopping $3,426. In a stunning comparison, Consumer Reports also investigated how much a drunk driving conviction impacts an individual’s auto insurance rates. It found that people with DWIs were quoted prices around $1,000 lower than people with weak credit scores.

Texas places few regulations on the auto insurance market. As a result, the state saw premium rates increase by 70.5 percent between 1988 and 2010, which is the highest in the nation. In contrast, California, which doesn’t allow auto insurance credit scoring, saw premium rates decrease by 0.3 percent over the same period of time.

Nearly two-thirds of Texas residents have credit ratings below 700, which ranks the state 47th in the country. Auto insurance rates in Texas are currently the 10th-highest in the nation. An insurance survey determined that the state’s premium rates were 4.4 percent above the national average. It also found that rates in Dallas County were the highest the state, mostly due to weak credit scores.

Those with good credit might believe credit scoring doesn’t affect them. However, Consumer Reports noted price differences of up to $300 between Texans with “good” credit and those with “excellent” credit.

Auto insurance industry trade groups claim credit scores are fair game because they are an accurate predictor of car accident claims. They also point out that consumers are free to shop around and get the best price for their individual circumstances.

According to industry experts, Texas consumers can save hundreds of dollars by choosing the right auto insurance company. Each insurer uses a different formula to attach risk to drivers. The formulas are top secret, so the only way consumers will find the best deal is to request quotes from several different companies and carefully compare rates. Texans are encouraged to use online resources to find the auto insurance company that best meets their individual needs.
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