As if things weren’t bad enough for people who have been affected by the mass foreclosures, job loss, and overall slumping economy; here is that proverbial “last straw,” that could be the back breaker. Everyone knows that a low credit score can determine the rate you pay on a loan; it can also determine your insurance rate.
A recent survey shows that 92 out of 100 insurers use your credit score, along with other factors, to decide whether to write you a policy, and if so, what your premium should be. Unfortunately, if you have a not so good credit score, you could end up paying more for your policies; a lot more.
How much more? A consumer with a poor credit score will pay between 20 and 50 percent more for their auto insurance premium, than a consumer with a good, or above average credit score. Additionally, add in your homeowner’s insurance, health insurance, and life insurance and you could be paying a significant amount more.
Insurance companies have been using credit scores, in addition to other factors, (such as geographic area of residence, age, type of vehicle and any previous claims), to determine rates, since the 1970’s. Is it fair? Many people say,” no”, but others say that “statistics” prove that people with lower credit scores are a higher risk.
There are currently only about six states that have laws regulating how credit scores are used, or prohibiting credit scores from being used to determine your insurance premiums. Maryland Lawmakers are debating on the issue now. Maryland has laws in place to prevent credit scores from affecting homeowner’s policies, but no laws against auto insurers or underwriter’s from using it in their calculation of risk or rates.