HOUSTON - There's a secret most drivers don't know about how their auto insurance rates are set. Having a low credit score can drive up your rates.
Advocacy group Texas Appleseed says in Harris County, a good driver with a good credit score pays an average of $571 a year for the minimum required insurance. They say a driver with the same driving record and car, with a low credit score, pays an average of nearly $1100. And it is has nothing to do with how they drive.
In addition to your driving record, gender, age, and city, insurance companies can use your credit score to set your auto insurance rate.
"The difference in Texas between a person with excellent credit and a person with poor credit, it can be the difference of $400 dollars or more," said Ann Baddour with Texas Appleseed.
Take a look at what Consumer Reports published in a report.
"They found someone who had a perfect driving record but low credit living in Texas will pay $1000 on average more for coverage, then someone who has excellent credit but was convicted of drunk driving," said Douglas Heller with Consumer Federation of America.
And researchers find communities of color or lower-income that often struggle with lower credit scores are hit the hardest.
"It's higher premiums for communities of color and low-income communities because credit plays such a role in our auto insurance. That's really unfair," said Heller.
The result, some drivers simply can't afford to buy insurance and drive without it.
"We want the market to be fair because it benefits everybody when all the drivers on the road carry auto insurance. It helps protect people's health and lives and property," said Baddour.
California, Hawaii, Maryland, Massachusetts, Michigan, Oregon, Utah and Washington have stopped insurance companies from using credit history to set auto insurance rates.
Advocacy group Texas Appleseed recently sent a letter and report of findings to the Federal Insurance Office, calling for change. And they want to hear from drivers experiencing this issue.
Meantime, to reduce your insurance rate, you can appeal it by notifying your insurer in writing if an adverse event, such as losing a job or medical bills, is hurting your credit score.
You can also work to improve your credit score.
"Drivers who improve their credit score just by one tier can save about 20% on their annual insurance premium," explained Danielle Marchell, spokesperson for The Zebra, an insurance comparison site.
Experts recommend drivers shop around for the best auto insurance rates every 6 to 12 months. The Texas Department of Insurance's online tool HelpInsure.com, as well as the Office of Public Insurance Council site can help you compare rates from insurance companies serving Texas.
Drivers can also take a defensive driving course and avoid tickets and accidents to get better insurance rates.