Credit and Insurance
Your credit score — one simple number — can affect all aspects of your financial and personal life. A high one can open all kinds of doors, while a low one can feel like doors slammed in your face — making everything you do harder and more expensive to achieve.
Your credit score is a factor in loan, lease and credit card applications, and it can even decide whether you can buy a cell phone plan or open a bank account.Â
But not everyone knows: it also affects insurance premiums. Even with spotless driving records, drivers’ credit scores can more than double their car insurance rates.
Some consumers might call that unfair, and they wouldn’t be alone. Four states—California, Hawaii, Massachusetts, and Michigan—have banned insurance companies from using credit scores to price or deny insurance policies. Three more states—Maryland, Oregon, and Utah—have restricted the use of credit scores as a factor in denying or canceling policies. Recently, state and federal legislators have started considering further bans on credit as a rating factor (a characteristic of a driver used to price insurance).