You already know that having poor credit can make it harder to take out a loan and will likely mean you’ll pay a higher rate for any money you do borrow, but you may not know that it can push up the prices of other purchases as well.
A new study by Nerdwallet finds that drivers with poor credit pay an average of nearly $700 more a year for car insurance, compared to drivers with good credit. Having poor credit pushes insurance rates up more than having caused an accident, which increases rates by about $450 a year, according to the study.
The impact of poor credit on insurance rates varies by state, with Michigan drivers with poor credit paying nearly $2,000 more a year to insure their cars. Drivers with poor credit in Louisiana, Delaware, and Washington, D.C., all paid more than $1,300 more than other drivers for their insurance.
The difference in Wyoming was the smallest, with drivers with poor credit paying $275 more to insure their vehicles. California, Hawaii and Massachusetts do not let insurers factor credit scores into premium costs.
Car insurers aren’t the only non-lenders who use credit scores to make decisions about consumers. Some landlords, potential employers and home insurers also consider credit scores, although some consumer advocates have said that the practice can be discriminatory and create a difficult cycle to break.