We get asked a lot of questions about what will affect a customers insurance rate. Hardly ever are we asked about how a customer’s credit will impact there insurance. Long story short, it makes a pretty good impact!
Yes, that little number that credit bureaus love to calculate doesn’t just affect your ability to get loans or credit cards—it can also influence how much you pay for insurance. Let’s break it down what this means for you and how you can take control of the situation.
Understanding the Link Between Credit Scores and Insurance Premiums in Maryland
In the insurance world, your credit score is more than just a number—it’s a key factor that insurance companies use to determine your premiums. Truthfully, most carriers are not looking at your FICO score alone to determine your rate, but they use it to determine what is referred to as an “insurance score”. Each carrier has their own methodology behind what drives this score, but nearly all in Maryland use credit as a major factor in determining your insurance score.
Studies have shown that individuals in Maryland with higher credit scores tend to file fewer claims, leading to lower insurance rates. This connection might seem surprising, but it’s based on the principle of risk assessment. After all, that is the business that insurance carriers are in – risk assessment and mitigation. This is why the carriers place such a high emphasis of importance on this.
Why Does This Matter to You?
Pricing! We are big proponents of making sure you have the right coverage in place for your insurance, but also, people do care about price! We get that. So improving your credit score, can impact your insurance score that carriers use, which in turn will help put you in a better risk category, which leads to better pricing!
Ultimately, your credit score highlights a critical aspect of financial wellness: maintaining a good credit score can lead to savings on your insurance payments. This is particularly true in Maryland, where your individual credit score is used by many carriers as a major factor in determining your “insurance score” referenced above. Other factors that go into your insurance score are things like payment history, claims frequency, and credit utilization. We can talk about those at a different time!
Tips for Boosting Your Credit Score
Want to work on your credit score to secure favorable insurance rates? Here are actionable tips:
- Timely Bill Payments: Ensures lenders and insurers see you as less risky.
- Maintain Low Credit Card Balances: Demonstrates responsible credit use.
- Limit New Credit Inquiries: Too many new accounts can be a red flag.
- Regular Credit Report Checks: Allows you to correct errors that might hurt your score.
It is important to talk to your agent when you have had life changes that are resulting in improved credit scores! Many times we can request a re-tiering of clients with carriers if we know their credit has improved, which in turn improves their insurance score with a carrier. It is never a guarantee, but it is important to have the trust and confidence in your agent to make sure they are utilizing resources like credit/insurance score refreshes to help your rating factors.
Navigating Insurance with Less-than-Perfect Credit
With so many different factors going into your insurance pricing, if your credit is not where you want it to be, do not panic! There are some carriers that are not going to provide the best pricing if your credit does not fit their exact ideal client profile.
However, as an independent agency, we have the ability to quote numerous carriers to find one that does fit for you! We as the agency cannot see your individual credit score, but we do know the market and know what carriers are going to be better based off your insurance score.
Additionally, if you have no credit, bad credit, or just a minimal credit profile, your driving history and claims activity will be more heavily looked at. Insurance carriers are always trying to look at ways to assess the risk profile at hand. If your credit score is not working in your favor, it is important to keep a clean driving record with no accident/claims to prevent being grouped into higher rates and less favorable insurance terms!
Takeaway
Grasping the impact of your credit score on insurance pricing in Maryland empowers you to make informed decisions about your financial and insurance planning. We are insurance professionals, not financial credit experts! Our advice on what can improve your credit score is just what we have seen work for others in the past.
Here at Younger Insurance, our commitment goes beyond the policies; we’re emotionally invested in your insurance journey. Insurance is not a buy it and forget it service. Your experience should include feeling understood, cared for, and comfortable with the coverage and policies you have. If you want to learn more about what it is like to work with us, or have questions about how your credit is impacting your rates, then fill out the form below or give us a call at 240-527-2344.