Right now, almost all car insurance companies require credit checks to determine how much your payments will be. Maryland drivers are required to maintain continuous insurance coverage, though this is often a challenge for drivers with lower credit scores who have higher interest rates. Recently, lawmakers have taken this issue into consideration, pushing for more regulation on car insurance rates based on driving records instead of credit scores. Learn more below:
Understanding Credit
Your credit score is a number between 300–850 that represents your track record of paying off bills and debts in a timely manner. High credit scores indicate to lenders that you are more likely to pay off your debt to them than someone with a lower credit score. This directly impacts your ability to get car insurance. A higher credit score decreases your car insurance rates, while lower credit scores could more than double car insurance rates. The effects of poor credit scores vary between states and vary heavily between insurance companies.
What Is “Bad” Credit?
Your credit score varies slightly from month to month, however, some actions may lead to a dramatic decline in your credit score. For example, even one late or missed payment can have a negative impact on your credit score. Determining if someone has “bad” credit is usually based on a tiered system like the one below:
- Excellent 800-850
- Very good 740-799
- Good 670-739
- Fair 580-669
- Poor 300-579
To improve your credit score, you must pay your bills on time, minimize your overall debt, and practice responsible spending habits. However, even the lowering of your score from just one missed payment can take months to recover from and will remain on your record for years.
Does “Bad” Credit make you a “Bad” driver?
Today, in all but two states, drivers are required by law to buy car insurance in order to operate a motor vehicle. Insurance companies use the argument that better credit scores correlate to fewer claims and accidents. However, some people believe that car insurance rates should not be based on credit scores, but on driving records. The issue has attracted the attention of state lawmakers. 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, joining California, Hawaii, and Massachusetts, which all outlawed the practice years ago.
Maryland Auto Insurance
Maryland Auto Insurance now offers convenient payment plans to help you budget your car insurance premiums, avoid extra financing fees and reduce the risk of lapses in coverage. As the #1 Maryland Auto Insurance provider in Maryland, we offer the best prices on My MD Auto Insurance with flexible down payment options. For your FREE My MD Auto quote, call 301-GET-MAIF today and start driving tomorrow.