Getting to grips with your client's credit score

By Ethel Wilson

It’s quite possible that you have not yet had the need to talk to any of your clients about their credit score, but that could change down the road. Credit scores are coming more to the fore every day, and the future could see you holding some awkward conversations. The status of a person’s credit score must be approached carefully and clinically. Someone with a bad credit score could be easily offended by the approach or choice of words.

Clients may feel embarrassed by an advisor or broker asking if the carrier can consider their credit score to determine their rates, and that could be especially difficult if they have never had to do so before. The number of carriers that consider credit scores is growing daily; it may be wise for brokers and customer service reps to reconsider their individual business practices.

Mind the customer’s needs

Industry insiders are increasingly stressing the importance of minding the customer’s needs. This includes having a clear understanding of what credit scores are. Though some say that credit scores shouldn’t be used by carriers, others consider them to be a good tool for assessing risk. Regardless of your personal views on the subject, the needs of the client must be put first. A good place to begin is with a discussion about cost versus coverage. Though credit scores do impact the cost of a policy, they are not the only factor to consider, even in the current “credit score climate.” Stressing this to a client will help put their mind at ease about discussing the matter.

If there is no need to breech the subject, then of course, discretion is the better part of valor. Not all carriers consult credit scores, so if you can get them the best price from one that doesn’t, the point is pretty much moot. That doesn’t mean you shouldn’t ask the carrier what prompts their quotes, as factoring the client’s credit score into the process might result in even greater discounts.

Have a handle on credit

There may come a time when you have to deal with credit scores on a regular basis. Understanding how credit scores work and what effects them can help you give your client better service. Credit bureaus factor in a bunch of things in calculating a person’s credit score. Here are the basics:
  • bill payment history (35 percent)
  • the amount they currently owe (30 percent)
  • the length of their credit history (15 percent)
  • the types of credit they use (10 percent)
  • new credit or recent credit applications (10 percent)
Encourage clients to educate themselves about their credit scores, too, and to take steps to raise them so that they can secure better rates.

The easiest way to avoid the issue is to consider only carriers that don’t use credit scores. To tell a client their rate has been affected by their credit score is one thing; to tell them that but then follow up with alternative options is another. Prepare yourself to dodge their anger; however, you should be prepared to tell them that you didn’t know their credit score would be a factor. Keep in mind that although the rules of disclosure may be in place, not every insurer adheres to them.

Though you may never have to discuss a credit score with a client, it is best to be prepared to do so knowledgeably, in case it does come up. It will help you gain the trust and respect of clients, which can only lead to a better and mutually beneficial relationship in the long term.