In all but two states, you are required to have car insurance in order to legally drive. However, because many Americans suffer from low credit scores, this makes acquiring car insurance more difficult than it has to be. The assumption that insurance companies rely on is that people with higher credit scores are less risky on the roads, and will likely not file as many claims. Does this mean that people with bad credit are bad drivers? Roadway Insurance chimes in on this topic below:
Understanding Your Credit Score
Your credit score is what most insurance companies will use to determine your interest rates, ultimately affecting your required monthly payments. Credit scores are supposed to indicate to lenders how likely it is that you will be able to pay off your debts in a timely manner. Your personal credit score may vary slightly on a month-to-month basis. However, even just missing one payment could cause your credit score to dramatically drop. In order to maintain a high credit score, you must pay all of your bills on time, minimize your debts, and practice good spending habits.
The Cons of Credit-Based Pricing
Adults living in areas where public transportation is minimal or unreliable must drive their cars in order to get to and from work. Additionally, families with children may need to drive in order to get their kids to school or after-school activities. If a family cannot afford to drive based on their high monthly insurance payments, this prevents them from accessing reliable transportation and ultimately from participating in modern society. With credit-based pricing, insurance companies are placing people with lower credit scores in a position where they must choose between driving illegally, without insurance, or having consistent access to reliable transportation. This is without considering the fact that many people with low credit scores do not have a history of poor driving behaviors.
There Is Hope
According to this NBC News article, a growing number of states are seeking to ban the reliance of auto insurance providers on credit-based pricing. Just this year, proposals prohibiting the use of credit-based pricing in the car insurance industry have emerged in Colorado, New Jersey, New York, and Oregon. This is in addition to similar policies already banning the practice of credit-based pricing in California, Hawaii, and Massachusetts. Lawmakers are hoping that insurance companies will take more consideration of their driver’s history behind the wheel, and drop the presumption that people with lower credit scores are not good drivers.
Since 1972, My MD Auto has been providing car insurance for any Maryland driver who is unable to obtain car insurance from the private market. If you have been denied auto insurance in Maryland, Roadway Insurance provides quick and affordable My MD Auto insurance quotes with immediate coverage. Get your free quote today!