Your Credit Score and How It Relates to Insurance (Part 6)

house Since insurance companies started using credit scores as part of the underwriting and rating for auto and homeowner insurance many consumer groups have said they believe use of credit history may have a greater impact on minorities and low income people. These consumer groups point out several studies of lending practices which indicate minorities and low income people are often targeted by sub-prime lenders, which usually leads to a negative impact on their credit history.

Consumer groups are concerned insurance credit scores will be lower for low income and minority groups, regardless of the fact insurance companies user the credit data differently. Consumer groups also believe it is unfair practice that the insurance industry won’t make their insurance scoring models public denies consumers the chance to see how they use credit data to calculate a score.

What can consumers do to find out more about how credit scoring is effecting their Insurance rates:

  • Ask your insurance agent or company if they have educational material that explains how they use credit.
  • Contact the Federal Trade Commission for information about the FCRA and consumer brochures on credit. Call 877-382-4357 or visit their website at
  • Choice Point offers a service which allows consumers to see their insurance credit scores.
  • Search the Internet, but be sure the information you find explains how insurers, not lenders, use credit information.
    Contact your local Cooperative Extension Service for information about improving your credit history.

Final points to consider regarding the use of credit reports and your insurance:

  • There is a good chance your current or prospective insurer is looking at your credit history and using it to underwrite and rate your auto and homeowners insurance policies.
  • Ask your insurance agent or company if they use credit information, how they use it and whether it affects your premium.
    Get a copy of your credit report from each of the three national credit bureaus and correct any errors.
  • Tell your insurance agent and company about any errors, and tell them your side of the story.
  • Improve your credit history if you have had past credit problems.
    Ask your agent or company for the primary reasons your insurance credit score is low and work to improve those pieces of your credit history.
  • If you are paying higher premiums because of your credit history, ask your insurer to re-evaluate you when your credit improves.
  • Shop around for insurance. Insurance companies use credit information in different ways, so your rates can vary dramatically from company to company.
  • Find your state Insurance Commissioners or other official state insurance regulating office website and check on your states regulation for insurance credit scoring.

It remains to be seen how credit scoring will continue to affect auto and homeowner insurance underwriting and rating in the future. There is great effort on a number of fronts to limit insurance companies use of credit information and these issues continue to be fought in state legislature and courts. For the time being it is safe to assume your insurance premiums and the types of insurance policies you are eligible to purchase are being affected by your credit score.

Photo credit for this blog entry: sxc (no use restrictions for this photo)

Other Blogs on the topic of Insurance Credit Scores:

Glossary of Insurance Terms:

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