Does any one but me think its bull that one might be refused car insurance or pay a higher premium because their credit score may be lower than some other guys. Why on earth are we letting car insurance companies get buy with this? Even car insurance companies having access to our creit history makes no sence and is a further invasion of our privacy. This practice should be outlawed.
10 responses so far ↓
1 Titzen_Ash_23
Yes, I agree with you 100%. They have NOTHING to do with each other! AT ALL!
2 Usaneko
Actually it makes perfect sense. If I borrowed money from 10 people and only paid back 4 of them, would you loan me money? Compared to a guy who’s paid back 8 of them? Auto insurers want to make sure they’re going to get paid, and they’re able to trust someone with a higher credit score than a lower credit score.
3 chocoPanda
your credit history matters I think because it would show your capacity to pay for the auto insurance. You may want to ask for a lower premium.
4 acermill
Underwriting insurance is a risk taking business. Anything the insurer can do to LOWER that risk is in the best interests of the insurer. Data clearly shows that those with lower credit scores are far more apt to make claims against their insurers than are those with higher credit scores. My guess is that is because those with poorer credit scores can’t afford to handle even the smallest incident without insurer help.
Anyone who does not want to pay the higher premium can simply work to get a credit score (and keep it) to the point that the premium is as low as possible.
5 Sue
Insurance works in generalities, generallly, people with low credit scores have more & worse claims. This does not take into consideration people who have bad credit through no fault of their own, loss of job, medical bills, divorce, etc.
In general people with bad credit live above their means, they get into credit card trouble because they spend more than they make. I know plenty of poor people with excellent credit, they don’t buy new cars every 3 years, they buy used cars every 10, they live in small homes & don’t buy clothes until the old ones wear out, they don’t have new TVs & stereos, etc.
Anyway, people with bad credit tend to be risk takers, they don’t care about the future (bad debt as an example), they live for today only. They also tend not to do maintenance on their house & cars (either can’t afford it or don’t worry about it). Deferred maintenance tends to cause claims (old brakes & old tires on a car = much better chance of an accident), don’t repair the roof on the house when needed = collapsed roof in winter, or ice backups, don’t repair plumbing when needed = water damage claims.
Insurance companies have compiled many, many years of statistics that support this. Progressive started credit scoring about 10 yrs ago. Also, the insurance companies file their rates with the States they do business in & almost all of the States approved this scoring to help to determine the rates.
Just so you know, insurance scoring is different than credit scoring. Credit is only a piece of a complicated rating method that uses over 100 different factors to come up with the “insurance score”. I know of a woman that had a bankruptcy & she still got an “very good” insurance score. She did do many positive things to repair her credit but the bankruptcy was still on record. I have seen lower insurance scores on people that had excellent credit.
The best thing to do is to shop around. There are companies out there that still do not credit score.
It really is not an invasion of privacy - no one “sees” your credit score - with Progressive no one even sees the insurance score, they just give a rate.
With my companies that insurance score, the insurance scores are usually A-M (A being best). I have a company that uses 1 to 44, 1 being best. I have a 25 page book that describes some of the factors used by one “insurance model” to come up with these scores. There are several insurance models out there & each company chooses the one that best suits them.
6 Queen B
Do you also think its bull that people with bad credit pay higher interest rates? Insurance is no different than any other business, they want to make money. its a fact that people with bad credit are more likely to be careless drivers, and not pay their bills and let things go to collections. as with anything in life nowadays, the better you keep your credit, the easier and cheap your life can be
7 mbrcatz17
Auto insurance and age? Auto insurance and gender? Life insurance and age??
The fact of the matter is, the numbers show that, as a group, people with lower credit scores file more claims, and have higher payouts on the claims they file. Why? Who knows. It doesn’t matter. It doesn’t matter WHY men die younger than women, or WHY teenagers have more accidents. It just is.
So, people who are higher risks, pay higher rates.
I suppose you’re not complaining that you don’t pay the auto rates of a 16 year old boy, or the life rates of an 80 year old man. Which leads me to think, you only complain about discrimination (which means, the practice of assigning different rates to different people based on the likelihood of a future loss) when it works AGAINST you, not for you.
8 newjerseyguy
Insurance underwriting is all about risk assessment and the insurance companies have discovered that there is a statistical link between poor credit histories and individual risk. You may not like it but its legal.
9 753nick@sbcglobal.net
In order to help decide how much to charge for insurance,
companies group consumers together based on similar
characteristics. For example, drivers in the same age group, of the same gender, or those who live in the same area are grouped together. Other groups include those with similar driving records or vehicles.
Companies then rely on the actual claims experience
within these groups to determine what to charge people with characteristics similar to those of the group. Consumers who belong to groups that, as a whole, have been found to be more likely to have accidents generally pay more than consumers in groups less likely to have accidents.
Insurance companies also group consumers based on their credit history because data shows, and a number of studies
have proven, that credit history is a good predictor of future
accidents. This is not to say that all people with a poor
credit history will have an accident. They can’t and don’t make predictions about any individual but rather about large groups and classifications of people. Another way to think of it is like this: as a group, younger drivers have more accidents so their insurance premiums are higher; but this doesn’t mean that all 17-year-olds are bad drivers, just that drivers in that age group are more likely to have accidents so they are charged more for their insurance. It’s important to note that they still use other information, like driving record and type of vehicle, to determine insurance rates. But by using information about credit history, in addition to the other information collected, they are able to offer consumers the most accurate rate possible.
10 Victoria c
You are correct, many insurance companies are indeed checking credit reports and refusing people, or charging more for those whose credit isn’t good.
A site I’ve recommended in the past would be…
Hope that helps.