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Credit scores and auto insurance.

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Credit scores and auto insurance.

It is not my intention to turn this into a political thread, so please try to keep your political views to yourself. Thanks.

Tlaib bill would prohibit use of credit scores to set car insurance rates
https://www.detroitnews.com/story/news/politics/2019/03/17/tlaib-bill-auto-insurance-credit-scores/3...

 

And from the other side of the coin:
https://insurancenewsnet.com/oarticle/namic-banning-credit-data-in-auto-insurance-underwriting-would...

Message 1 of 15
14 REPLIES 14
Established Contributor

Re: Credit scores and auto insurance.

Didn't read the links but am aware of the upcoming bill.
Honestly, credit has no correlation to driving ability. Insurance rates would make more sense if directly related to driving record. I've been side swiped and rear-ended by two people with 'stellar' credit. 😐
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Message 2 of 15
Frequent Contributor

Re: Credit scores and auto insurance.


@XtraCredit wrote:
Didn't read the links but am aware of the upcoming bill.
Honestly, credit has no correlation to driving ability. Insurance rates would make more sense if directly related to driving record. I've been side swiped and rear-ended by two people with 'stellar' credit. 😐


The insurance industry is all about assessing risk. Credit based insurance premiums came about after several studies were completed, including by the FTC, that linked those with lower scores to more claims and higher payouts. As long as it can be used, insurance credit scores will be a tool for assigning premiums. 
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Message 3 of 15
New Contributor

Re: Credit scores and auto insurance.

This certainly doesn't stand true for me...my credit sucks (for now) but I have a stellar driving record and no accidents! Smiley Happy

Starting FICO 8 Score: 2/12/19 EQ579, TU 588, EX 624
Current Score: 5/13/19 EQ671, TU 668, EX 642
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Message 4 of 15
New Contributor

Re: Credit scores and auto insurance.

Totally agree with ya!

Starting FICO 8 Score: 2/12/19 EQ579, TU 588, EX 624
Current Score: 5/13/19 EQ671, TU 668, EX 642
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Message 5 of 15
Community Leader
Valued Contributor

Re: Credit scores and auto insurance.

While I understand the whole “risk assessment” aspect, I do think that credit scores should be a very minor (if at all) factor when determining insurance rates. Like another poster said, people with excellent credit can still rear-end you lol. And the guy with a 450 score may be the most cautious driver in the world. Oh well, I won’t lose sleep over it. Progressive gives me a pretty great price. 

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Message 6 of 15
Regular Contributor

Re: Credit scores and auto insurance.

Using credit scores to set insurance rates vs actual driving record is one of the biggest scams ever, I hope it is tossed into the scrap bin of history soon.

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Message 7 of 15
Frequent Contributor

Re: Credit scores and auto insurance.

To my knowledge, auto insurance rates aren't based on actual FICO credit scores but the scores that are used have some of the same data inputs to determine those scores. @Thomas_Thumb started a thread a while back about the auto insurance scores on Credit Karma (from TransUnion).

 

https://ficoforums.myfico.com/t5/General-Credit-Topics/Free-Transunion-Credit-Based-Insurance-Scores...

 

FWIW, it's possible to have terrible FICO scores while still having good insurance scores. My FICO scores are sub-600 and per CK, my auto insurance score from TransUnion is 885 (out of 950).

Screen Shot 2019-03-25 at 6.50.12 PM.png

 

Message 8 of 15
Regular Contributor

Re: Credit scores and auto insurance.

The whole credit score determines auto risk mantra falls apart in numerous situations, including mine, where I was forced into BK in 2010 during the recession. This nuked my credit score but changed my safe driving record not a bit, in fact I probably drove more carefully because I was so broke I couldn’t afford to even fix a windshield at the time.  

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Message 9 of 15
Moderator Emeritus

Re: Credit scores and auto insurance.

I don't know how much correlation insurance scores have with the more common FICO scores to begin with.

 

Looking at the historical record on Credit Karma (Transunion), there was absolutely no dip in my score when I took a brand spanking new 60D late on a credit account, lost a few points perhaps on utilization the next month, then up to 880 where I've stayed flat since then till today.

 

Going back much earlier, it's clear thin files are penalized on the insurance score.

 

Doesn't like a bunch of new accounts either apparently.

 

Tax lien / collection don't look like major deal killers, maybe 40 points max.

 

There's a lot of swings up and down on my insurance scores when I know some scores like EQ FICO 5 were flat during that period, so I'm not sure there's a lot that can be really compared between the two.

 

Incidentally my mortgage insurance score did move over the last year, potentially correlated with my running up my HELOC which FICO 8 flatly ignored for example, actually suggests more trending with older scores like EX FICO 2.




        
Message 10 of 15
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