Credit Scores May Have Big Impact

by Jessica Cervantez

Mary Shanklin, an insurance agent, uses credit scoring as one of the tools to determine premium rates for her customers.

Shanklin said, "It's a tool that a lot of insurance agencies are using that is proven to be effective in determining the risk factors of certain groups of people."

But, not everyone agrees with linking credit scores to insurance rates. Critics say, doing that discriminates against poor people and minorities because those groups often have lower credit scores. Agent Shanklin disagrees.

Shanklin said, "There's been some talk about it being discriminatory, in my business that is not the case at all.  I have been able to determine, my lower income clients that maybe Hispanic or African American, their credit scores are as good as folks that maybe in a higher tax bracket, in some cases much better."

For insurance agents, it comes down to a business decision. Research has shown them a link between credit scores and insurance claims.

Shanklin said, "The loss ratios have proven that people that have a better credit history have less claims or that their claims are less costly."

That means, to keep your insurance bills low, good credit helps.

Shanklin:"There is talk that people with more credit have better scores, well that's not necessarily true.  People that manage their credit and do a good job are liable to have a better score not that they have more credit."

Credit scores aren't the only factor in setting your insurance rates. Even with poor credit, you can sometimes get a break, if you can prove you deserve it.