Consumer Alert: Got a bad credit score? You pay much more for car insurance in New York

ROCHESTER, N.Y. – A study by the Consumer Federation of America shows that New Yorkers with low credit scores pay more for their car insurance, even when they have clean driving records. The study found that those with bad credit scores pay on average $1,367 more than those with excellent credit.

And the situation is worse for those with bad credit scores who live in predominantly Black neighborhoods. Those folks pay on average $3,411 more. Insurers say the practice is justified.

“Over the years, studies have demonstrated that drivers with lower credit-based insurance scores have higher losses and those with higher credit-based insurance scores have lower losses,” Jeffery Brewer, vice president for public affairs at the American Property Casualty Insurance Association told Consumer Reports. And he says a driver’s zip code can indicate a higher risk for accidents and theft as well.

Assembly majority leader Crystal Peoples-Stokes says that’s garbage. She’s sponsoring a bill that would ban insurance companies from this practice. She says while she’s not poor, she does live in a zip code that is charged higher rates and people should not be punished with higher rates just because where they live.

Credit-based insurance scores have been used by insurers for nearly 30 years. So the Consumer Federation of America got quotes for every zip code in New York from ten insurance companies that represent 80% of the market.

Get this- the federation found that people with excellent credit and a DWI conviction pay hundreds of dollars less than someone with poor credit and a completely clean driving record. Only four states — California, Hawaii, Massachusetts and Michigan do not allow auto insurers to use credit-based insurance scores. Unless and until the New York legislature passes legislation making the practice illegal, it benefits you greatly to take steps to improve your score.

Here’s Deanna’s Do List for improving that score:

· Ask for a higher credit limit. It seems counterintuitive, but when you have more credit available to you compared to how much you owe, you improve your credit utilization rate which improves your score.

· Pay your bills on time. If you’re late, call the credit card company and ask them to waive it. Often they will if you’re not doing that often.

· Become an authorized user. If you have a thin credit file, asking to be an authorized user on your family members’ card can help your score.

· Use a secured credit card. This is especially useful if you have a poor credit history. Secured cards are backed by your cash deposit. You then improve your score by paying that card bill on time.

· Keep your credit card open after paying it off. Having that line of credit helps your credit utilization rate.

It pays to compare insurance rates as well. US News has helpful information on how to compare rates.

The following sites are also helpful when comparing the rates of different companies:

· The Zebra

· Value Penguin

· Nerd Wallet