Can Your Credit Score Impact your Car Insurance Quotes?

In most States, insurance providers are allowed to consider your credit rating when it comes to providing a car insurance quote. The argument that insurance companies make is that individuals who have a poor credit score are a greater risk when it comes to insurance. They’re more likely to allow insurance to lapse, or they’re more likely to have claims on their insurance.

Whether or not that’s all true is still debated. And, as more and more Americans find that their credit scores have been negatively impacted over the past several years due to the economic downturn, consumers are up in arms about the practice.

Take, for example, the current situation in Michigan. Currently, there are groups within that state who are pushing for some specific changes in the way car insurance quotes work. They’ve even traveled from all over the state to the capital in Lansing to protest the practice of using your credit rating to set your insurance rates.

Consumer advocates make the argument that the practice unfairly targets those who aren’t as well off economically. They suggest that the system makes people with bad credit pay even more for their car insurance than someone with good credit who has a history of accidents, or even a history of drunk driving convictions.

These advocates point out the record profits being made by the insurance companies, and how the state of Michigan has some of the highest car insurance rates in the entire nation. They suggest that the use of the credit score is a ruse, designed to line the greedy pockets of these companies.

However, those in the insurance industry may disagree. They counter that there is a proven statistical relationship between being financially responsible and being a responsible driver.

Consumers hope to pressure the Michigan state senate to pass legislation that would ban the use of credit scoring in determining car insurance rates. A bill with that provision has already passed in the Michigan House of Representatives. Whether or not the advocates will be successful, of course, remains to be seen.

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