Have bad credit? Why that could make you pay more for car insurance in NJ

Do you have a good credit score?

A new report finds if you’re looking to buy a car in the Garden State your credit score may be a lot more important than you might imagine.

The WalletHub study finds car insurance premiums in New Jersey can fluctuate by 100 percent based on credit score, and drivers with no credit history may pay at least twice as much as drivers with a long history of good credit.

According to Christine O’Brien, the president of the Insurance Council of New Jersey, there are many rating factors that insurers takes into consideration when writing an auto policy. But “how people manage their credit ranks consistently and correlates with how people are then determined to be a high, medium or low risk. There is a direct correlation over years of study.”

She said insurance companies use your credit score to help determine what you pay for coverage, but “the good thing about New Jersey is consumers actually are protected from just a willy-nilly use of a credit score.”

She explained the state Department of Banking and Insurance “makes sure that your credit score can’t be used to deny you auto insurance, nor can it be used to cancel or non-renew a policy.”

The Department of Banking and Insurance also makes sure that when somebody has an extraordinary life event, “like if there’s a death in the family, temporary loss of unemployment, identity theft and your credit score may be altered, you can’t use that as part of the rating factor.”

Some insurance companies don’t use credit score information to help them determine how much to charge you for a policy.

“When you do apply for insurance, the companies in New Jersey are obligated to tell you, if you ask, whether or not that is a factor.”

She also points out that insurance companies, if you make a request, will give you a lot of information about
“insurance scoring and how you can actually, if your rate your policy and your premium rate is affected by your insurance score, how you can improve it.”

Auto insurance companies consider multiple factors, not just your credit score, when determining the cost of your policy.

“Everything from your ZIP code, the proximity to where you might live, to high traffic areas, the type of car you drive, how long you have been driving — there are so many multiple factors that an insurer can use to accurately determine you as a risk,” she said.

If you don’t want to get auto insurance from a company that factors in your credit score, you don’t have to.

“Every consumer in New Jersey is lucky to be able to have a huge number of options when it comes to shopping around for auto insurance,” she said.

“Some auto insurers want to write younger risks, others want to write older risks, others want to be able to be able to afford an entire family discounts if they are on the policy together.”

She said the bottom line is that “it is to the advantage of every driver in New Jersey to shop around for auto insurance, because the market is very competitive and they want your business.”

You can contact reporter David Matthau at David.Matthau@townsquaremedia.com

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