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States are taking a second look at how credit scores affect car insurance rates

IntegerIntrovert
Regular Contributor

Re: States are taking a second look at how credit scores affect car insurance rates

My state recently banned credit scores; my premium went up 26%. People that think credit scores shouldn't be used are generally the people who have bad scores.  Just like people who want them to use scores, are the people that have good scores.



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Message 31 of 45
Taurus22
Valued Contributor

Re: States are taking a second look at how credit scores affect car insurance rates


@IntegerIntrovert wrote:

My state recently banned credit scores; my premium went up 26%. People that think credit scores shouldn't be used are generally the people who have bad scores.  Just like people who want them to use scores, are the people that have good scores.


I disagree with this. My scores are what would probably be considered high (800+).....but I still think using credit scoring to determine auto insurance is absolutely ridiculous. (I also have a clean 18-year driving record since my last infraction, FWIW) Because it affects you no matter what your scores are, no matter what tier you are in.

 

If your scores are 820 when they SP your credit for this 6 month term, you get X rate. Then the following 6 month term your scores drop to 805 because you applied for a new credit card......your insurance rates are increased because of that minimal drop in scores. You're still in that same FICO tier bracket (800+), but according to auto insurance scoring, it only sees the drop by X points since their last SP check, and then penalizes you for that drop.  The following term, if your scores dropped to 798 for whatever reason, you would be penalized again.....although you may have a completely clean driving record.  Absolutely ridiculous.

 

So regardless of your credit tier, it affects you. 600 or 800.....doesn't matter. In your case in particular, (not knowing your scores at the time they banned this for you, and not knowing your driving record) it's possible your credit scores were actually helping you get better rates.

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Message 32 of 45
SoCalGardener
Valued Contributor

Re: States are taking a second look at how credit scores affect car insurance rates


@IntegerIntrovert wrote:

My state recently banned credit scores; my premium went up 26%. People that think credit scores shouldn't be used are generally the people who have bad scores.  Just like people who want them to use scores, are the people that have good scores.


I know you're generalizing, but that's usually not a great idea because we're all so different. As noted in my post upthread, I've always been against using credit scores as a factor in getting car insurance, as they're totally unrelated and it makes absolutely no sense. AND I have stellar credit.

 

I've never heard one single LOGICAL reason credit scores should be a factor when issuing auto insurance. Not one! They're as unrelated as asking "what color paint is on your kitchen walls?" WHO CARES? How does that affect my driving ability? They're completely unrelated.

 

The way I drive is the way I drive, and that's completely independent from my *current* credit scores. I have a spotless driving record--not even a parking ticket in the last 35+ years--and have never filed a claim with Allstate for anything *I* did. The only accident I ever filed a claim on was with the OTHER guy's insurance company, since he broke the law and ran into me. He would've broken the law and run into me that day whether my credit score was 500 or 850!

 

I'm not any more prone to filing claims now than I was when my scores were low (due to catastrophic medical bills). They're simply two unrelated things.

 

By the way, what color are your kitchen walls?! Smiley Very Happy

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Message 33 of 45
SOGGIE
Valued Contributor

Re: States are taking a second look at how credit scores affect car insurance rates

@SoCalGardener I couldn't agree more with you. Imagine the reverse... one's credit score being based on their driving record. Neither make sense. 

Life was a lot simpler when what we honored was father and mother, rather than all major credit cards. ~Robert Orben
Message 34 of 45
Remedios
Moderator

Re: States are taking a second look at how credit scores affect car insurance rates

According to LN, a person with lower score is by far more likely to engage in litigation, hence higher premiums. 

 

I could totally understand this logic if I had my predjudice glasses on.

While high utilization may indicate financial trouble, that's like going to Safeway and hearing  "If your score is lower, you will pay higher price for food because you're only here to purposefully fall and sue us" 

 

On top of it, cost of potential future litigation is already baked in for all of us, but by using CBIS, they get to double dip with those who have lower credit scores. 

 

This practice should stop because it's punative without wrong doing unless LN is willing to share data showing what this form of discrimination is based on. 

Message 35 of 45
MichaelMyers
Regular Contributor

Re: States are taking a second look at how credit scores affect car insurance rates

They should abolish the use of credit scores for auto insurance altogether. Employment as well, unless it's a job where you handle cash.
Message 36 of 45
racole82
Valued Member

Re: States are taking a second look at how credit scores affect car insurance rates

This is good to know. I’m currently paying Geico $250 a month for one car and no recent accidents. I plan on getting some new quotes next week because my credit score has increased.

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Message 37 of 45
SoCalGardener
Valued Contributor

Re: States are taking a second look at how credit scores affect car insurance rates


@MichaelMyers wrote:
They should abolish the use of credit scores for auto insurance altogether. Employment as well, unless it's a job where you handle cash.

Why? Just because someone's credit score isn't great, doesn't necessarily mean they're prone to stealing from their employer. I can see where a person's criminal record could be useful here, i.e., if they were in prison for stealing, maybe they're not the best choice for a job as a cashier, but credit scores? I'm not seeing it.

 

Really, other than for credit-related purposes, I don't think credit scores should be used at all!

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Message 38 of 45
Brian_Earl_Spilner
Community Leader
Mega Contributor

Re: States are taking a second look at how credit scores affect car insurance rates


@Remedios wrote:

According to LN, a person with lower score is by far more likely to engage in litigation, hence higher premiums. 

 

I could totally understand this logic if I had my predjudice glasses on.

While high utilization may indicate financial trouble, that's like going to Safeway and hearing  "If your score is lower, you will pay higher price for food because you're only here to purposefully fall and sue us" 

 

On top of it, cost of potential future litigation is already baked in for all of us, but by using CBIS, they get to double dip with those who have lower credit scores. 

 

This practice should stop because it's punative without wrong doing unless LN is willing to share data showing what this form of discrimination is based on. 


Indeed. I'm pretty sure there was some correlation drawn between those with bad scores and ability to pay their bills. Something like, someone who is unable to pay their bills is more likely to be underinsured so they can afford their premiums, which leads to the increased chance of litigation. 

 

While I can see the logic, I don't agree with it. If I lived in a state that used credit scores, I'd be screwed because I ended up in the hospital that one time 5 years ago.

    
Message 39 of 45
805orbust
Established Contributor

Re: States are taking a second look at how credit scores affect car insurance rates

I don't know why this isn't easy to understand. There is a financial benefit to penalizing someone for whatever reason. And it benefits members of the government to allow this in their regulatory decisions (speaking engagements? Cushy jobs after government?  😆) I mean, even credit scores are BS. It is quite obvious that they want to know you'll pay your bills, but still get you for as much interest as possible. A 620-680 customer is probably the perfect customer for a bank... They're gonna pay, but we can charge them up the wazoo and they'll be glad we let them play.

 

Let's not lose ourselves here. We just had a new Matrix movie released for goodness sake. 🤣


Message 40 of 45
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