Orwell had it wrong......it's not the Goverment we should be worried about but all this "data" that is out there with no control on how it is used. Or what that data truely means. Knowledge without understanding leads to misuse, that has been proven thoughout history......

More reason to believe that bean-counters and button-sorters (accountants and number-crunchers) are as detrimental to the culture as lawyers.

Shop around? With each insurance company taking a gander at my report? No thank you. Each time they look, they leave a tag that they looked, and THAT adversely affects my credit report as well. Lenders will see that as too many inquiries, and think hmmmm do I lend to this person?

I don't think better credit scores mean you are a better driver. It only means that you can probably afford to pay for many of the minor (less than $1000) repairs that someone with a lower credit score (most probably a person with a lower paying job) cannot pay. I live in an area with a lot of expensive cars (BMW, Mercedes, Lexus, etc.) and I think that many of these drivers are just as bad as the person driving the chevy, pontiac, ford, etc. This is just another way to gouge the consumer. Consumers can no longer protect any of their information; it's required for everything (many times unnecessarily).

Very interesting. I would like to see a truly unattached third party produce a scientifically accurate study on whether a good correlation actually exists between the two. My credit score was once over 650, but is now under 550. While finishing my graduate degree I accumulated a lot of debt relative to my income, and it brought me down. My driving skills haven't diminished however. I wonder how many people are in similar situations, of if I'm the exception to a rule.

Geez, what an eyeopener - I"m definitely passing on this info - love your articles - thanks!

Consumers should know that every time their credit is checked by an agency like a Geico, their score may fall. If you respond to numerous "good deals" such as an auto insurance rate reduction opportunity, you could also be reducing your good credit score whether or not you end up getting the rate reduction.

One thing that you shold have mentioned was the effect of carrying balances on credit cards issued by your insurance company. I transferred the balance of one card onto a new card issued by State Farm when they offered me a 0 per cent rate for 6 months. I promptly transferred it out when the 6 months were up and haven't used it since. Are there are some sort of industry firewalls preventing insurance companies from hiking up your insurance rates if you are late with CC payments and vice versa?

I feel it is completely unfair to use credit scores as an indicator of carelessness. For example, I have a perfect driving record and I also have perfect payment of my mortgage. I am unsure of how my credit has affected my car insurance but i cannot obtain homeowners insurance through any company that utilizes a credit check. I have been denied every time and most recently by Geico who coincidentally i have auto insurance with and have paid on time for over 7 years. It is about time some legislation is addressing some of these issues but in my opinion it is not enough and law makes need to focus on the issue more than they have...

Geico is my insurance carrier and I was not aware that they pulled my credit score. I did not apply for credit with them. Why do they even have access to my credit report?

Your rates are also based on your zip code. I found that when I lived in an area that was considered a good area, but used the same zip code from a different area that was not so good because there was no post office in my area my rates were higher. When I moved to another good area that had it's own post office and zip code, my rates went down.

Several years ago I was dropped by Allstate saying my credit score was too low and that people with a low credit score file more claims. Since I'd been with Allstate and NEVER filed a claim, I was perplexed why my credit score would have anything to do with my auto insurance. I will NEVER, EVER use Allstate and I tell all my friends to NEVER use Allstate, also.

Great story, very thorough. But it points out one of the very few places left where the good guys win. No, I'm not defending the insurance industry. Those who pay their bills on time, drive more carefully and have fewer wrecks pay less for coverage. Sounds good.
Do what you are supposed to do and get rewarded - I like it!

It is obvious that insurers are resorting to such tactics because THEY CAN GET AWAY WITH IT !
It does not take a rocket scientist to deduce that there is absolutely no correlation between low credit scores and higher claims!
Many of our elected representatives who are charged with safeguarding the public's interests are simply looking the other way either because they have a vested interest or consider other issues as a higher priority.
What all of us do not realize that this slow creep of increased burden on everyone - mostly unwarranted except for short term greed, is going to destroy this country and very soon.
Higher indirect taxes, cost of homeland security, gasoline and energy prices, and whole host of hidden and not so hidden charges.
The strength of our middle class is fast eroding and we will soon be a nation of Haves and Have Nots and this is just one more example.
Mahatma Gandhi once said - there is enough on this for every 'man's' need but never enough for one 'man's' greed !
Not too distant in the future, we may be reading 'The rise and Fall of the American empire' !
Wake Up America !

I believe its now time for Congress to pass a Constitutional Amendment, first to protect privacy (Strictest possiable rules) and to outlaw Credit Reports, or to have only banks (And no other industry and no job could use them also) use them for commerce loans (not home loans).

It just goes to show that all consumers, regardless of age, race, creed, nationality, etc should be mindful of their credit report and score. Too many people let it fall by the wayside and don't manage it wisely by paying off debt, paying bills on time, etc. As we can see from this article there are many areas of our lives that are affected by it that we may never even notice.

I just recently found out that my less than stellar credit scores were responsible for my receiving a higher quote from Geico (I received a letter from them saying so). I was outraged. My record is clear sans one speeding ticket from 5 years ago. A close friend of mine with a worse driving record but fantastic credit scores received a quote from them for considerably less ($200 less annually and she has a newer, more expensive car than I do). I questioned Geico and they wouldn't tell me exactly how much difference my credit score played in my quote, but clearly, it played a difference.

Can you publish the states that use credit scores to set insurance rates?

What is the point of going with one of the "Big 3" insurance carriers if they are going to make a correlatiation of credit scores with driving habits?

my father, 67 years old, had to file bankruptcy due to medincal bills form 2 heat attacks. Because of the credit score vs auto insurance issue here in Ohio he is forced to pay more per month for he and my step mom then I pay for me, my finace, and her 16 year old son...shamefull!!

Well, what an interesting correlation. Low credit score equals a higher probability that the driver will get into more accidents. I don't think so. I had problems when I got out of college with my credits. Yeap, I was one of many students who signed up for all the credit cards they would offer me. Still, ever since I got my license, I have only had 1 speeding ticket 7 years ago and no accidents. This practice has to stop. You cannot charge consumers who have a lower credit score just because some statistics show a correlation. Remember, numbers can be misleading. In the summer, ice cream shops have a higher rate of profit, and at the same time cities experience a higher rate of crime. Could you then conlcude that the ice cream causes people to commit crimes???? Don't think so. Insurance companies are just looking for a reason to charge more.

Are you sure that credit score is attached to lifestyle habits of drivers? Or is it prehaps related to insurance companies protecting themselves against customers inability to pay there premiums in a timely fashion?

After over 30 years with Pemco and no claims, our auto insurance was raised over 30% due to a business failure that led to a bankruptcy. Don't tell me the auto insurance industry isn't using credit scores unfairly to line their own pockets.

Credit Scoring is just Phrenology for the 21st Century. Credit scoring has assumed a coercive posture from which it functions as a nonconsensual form of social control: simply put, people often subvert their behavior to maintain an optimal score. One such criticism I have about credit scoring is that many people feel pressured into maintaining what they think are an optimal number of credit cards (three to five), which they use every month and watch the balance/limit ratios; service a proper credit “mix” involving revolving and installment loans; and maintain an active credit history, all to keep up that cold-hearted three-digit number. Many such individuals have admitted to me that they normally would not go through this tortured financial wickey-wackey if it were not for their credit scores. Other people, who do not participate in the credit economy, such as myself, often pay higher insurance premiums or are otherwise "punished" because we behave “outside the model” and the scoring algorithms cannot generate a score for us. Credit scoring’s advocates are, however, too obsessed with credit scoring's imaginary prescience to reconsider their use as flawed digital doppelgangers of all individuals in an effort to distill all the emotions, complexities, vagaries, and variables of human behavior into one bite-size, three-digit number.

Credit scoring begs for critique because its consequences have been forced upon increasing numbers of individuals. Whether willing participants or not, our credit scores are drawing more unwanted watchers who believe it is a reliable window into the soul. Many people who do not use credit or have minimal credit activity—a mortgage for example, and no other debt—are judged according to their performance in an activity--credit--in which they do not actively participate. These models cannot generate a score for individuals who are servicing minimal or nonexistent debt, yet those individuals can—and often do—suffer consequences because they don’t yield their behavior to a computer algorithm.

Another complaint is the lack of proportionality in the credit scoring models: someone can spend years building an good score, yet one black mark can send that score tumbling, only to take years to rebuild. Someone can have good credit with a good score, yet one demerit can cause his score to plunge by 70 or 80 points. It reminds me of a workplace joke about how one ‘oh no’ can wipe out 10 ‘attaboys.’ How does this work for anyone?

The idea of forcing a one-size-fits-all scoring model on a society like ours, which has such a diverse population in terms of financial and social behavior and mores, family traditions, and individual attitudes, is the height of absurdity. Think about what some of these credit scoring advocates are trying to tell us, then ask yourself, "If I am late paying a credit card bill, how does that pose a greater risk to my insurance carrier that my property will suffer severe weather damage?" This buggy correlation forms the essence of the argument credit score advocates are trying to get us to believe. I live in Dallas, Texas, which has a problem with people running red lights. Lets see, if I were to have a good credit score, does that mean I am less likely to get hit by someone running a red light?

We need to discourage use of credit scores as one-stop clearinghouses for assessing personal virtue and remand them to where they belong—the role of granting credit. Using credit scores as a measure of a man’s character is as absurd as using race as a measure of his character; it’s just that credit scoring is an acceptable form of profiling whereas race is not. Weaning people off the practice will take time to overcome,however, because it is human nature to cling to simplistic, one-size-fits-all views of people, but we need to start sometime.I can’t help but think of Voltaire’s admonition that “it is difficult to free a fool from the chains he reveres.”

The credit reporting industry is so shrouded in mist, we are prevented from knowing which items in our credit reports hurt us the most or cause adverse actions. The credit scoring algorithms are proprietary--when attempting to gain some insight into how scores are computed, you are simply given the same old "pay your bills on time" blather by the credit reporting agencies. It's a good axiom, but that's not the point. Our lives are dominated by this scoring system, so why can't we know just how its computed so we can compute it ourselves?

And, if we are victims of an adverse action based on our credit score, why can't we obtain our credit score for free as well?

Welcome to the brave new world!

"They've given you a number and taken away your name." -- Secret Agent Man by Johnny Rivers

Disgusting, once again your article shows how corporations take advantage of us.

Allstate and State Farm use this practice for sure. It is unconscionable that these companies would assume that you would purposely wreck your car because you have lousy credit. You are so screwed if you live in a state where auto insurance is mandatory. Auto insurance premiums should be based on your driving record. If you don't have a driving record, then your first 6 months should be a little higher initially and as you build up your driving record, premium accordingly.

there are numerous other areas that unfairly overcharge bad credit scorers. the dollars amounts that these low scorers pay is phenominal. check advance companies, higher interest rates are obvious, but do add up significantly, and numerous other ways. one estimate is that some pay as much as $15,000 annually for simply low scores, although some could consider this deserved.

OK, so what's the case in which a court ruled that insurers must disclose the "best credit score" rate?

I've definitely fallen victim to high prices due to incorrect data in my credit report. Geico had me paying more for insurance than I was paying for my car note. Once I shopped around and received quotes from other insurance companies, I saw that choosing them was a big mistake. My advice is take the time and do research.

there are numerous other areas that unfairly overcharge bad credit scorers. the dollars amounts that these low scorers pay is phenominal. check advance companies, higher interest rates are obvious, but do add up significantly, and numerous other ways. one estimate is that some pay as much as $15,000 annually for simply low scores, although some could consider this deserved.

I've definitely fallen victim to high prices due to incorrect data in my credit report. Geico had me paying more for insurance than I was paying for my car note. Once I shopped around and received quotes from other insurance companies, I saw that choosing them was a big mistake. My advice is take the time and do research.

Sigh...

I agree 100% with the points you've made in this article. It might be a easier to swallow this if I knew that credit scores were accurate-but they're not and the insurance companies are using that flaw to their advantage.

Almost 2 months ago, I moved from one city to another within my state, around 20 miles. I called my insurance co, AAA, to change the address. Two weeks after I did that, AAA sent me a letter indicating that my premium has went up by 50% from $600 annualy for liability coverage to $1200. REASON: you are in a higher risk area now. I have been a custmer with AAA for 6 years and I have 0 accidents and 0 tickets and this is what I get for being a loyal customer. I could not even believe what they did and they did not even care. As far as I am concerned, it is all a scam and they give no one no credit for anything. The only credit just goes to thier pockets.

"The question every consumer should ask their insurer right now is this: What would my rate be if I had the highest possible credit score?"

I work for a major insurance company. If we had a client walk in the door with this request, it would be impossible to reply with a dollar amount that isn't a shot in the dark. The pricing model uses so many variables, and agents in the field aren't privy to that information. There is no format (yet, nor do i believe there ever will be) for us to plug in hypothetical scenarios (such as high credit scores) and get a set rate. We can provide quotes for different driving classes and take away accident ratings...but no such luck for credit scores. We use Choicepoint, and we will gladly (for free) order a CLUE and credit report if they so request. All information is sent to them and we see no credit details whatsoever.

Here's something I would like to know: shopping around for auto insurance is obviously a good idea, even apart from this article. But it has been well established that too many inquiries into one's credit report can result in a lower credit rating. So, if one checks rates with five insurance companies, will that show up as five inquiries and hurt one's score? Can consumers be punished for prudently comparing prices?

There is also a law in most states now that require motorists to have insurance or face stiff fines or lose driving privileges entirely. Does this give an upper hand to the insurance companies? I think so, they can charge what they damm well please and we have to take it. Now lets pass some laws that allow if you’re a senator or congressman you will have to pay higher rates. After all they passed the laws granting the insurance industry this insane profit fixture.

Credit scores have NOTHING whatever to do with auto insurance any more than the old statistical ploy "When tar melts on the street, more babies die". (results from a common cause - the heat melts the tar and simultaneously stresses infants - the statistical "postulate" used to be "therefore if we heat tar with a blowtorch, we can make babies die" - and of course, it's an incorrect postulate - by the way that statistical argument was from a statistics textbook some 50 years ago)

What needs to have happen is to have some kind of California-Hawaii type law at the national level...

(proof positive that Mark Twain was right - there are LIES, DAMNED LIES, and STATISTICS!!)

What's next - investigation of medical records to correlate whether people with ragweed allergy have higher accident rates? Perhaps records of parking tickets? (moreparking tickets more accidents) How about library book check out records?

I can follow the logic that people with lower credit scores due to late payments are more likely to be late paying their insurance premiums. But how are they more costly to insurance companies when it comes to claims? They are also late crossing busy intersections??? That doesn't make sense. A better solution to deal with those who don't make payments on time is to implement a system of fees/penalties or something, but not to raise rates. That's just not fair.

It's a little bit scary to think that if someone made a mistake on my report that I would wind up being charged so much for it. Bad enough to get higher interest rates, but getting charged extra for insurance? That's just crappy.

It is outrageous that our lives are now being held hostage to credit scores, particularly since the vast majority of credit problems are caused by things beyond our control, like divorce or disaster. It is in most places impossible to get around without a car, and therefore impossible to avoid buying car insurance, leaving us trapped when all of the supposed "competitors" collude in this sort of scheme.

This is yet more proof that big companies (especially insurance and banks) with deep pockets have bought out our elected officials, with bribes euphemistically called campaign "contributions", putting corporate profits and even outright scams well before the privacy and other rights of the people. It's not the gays, immigrants, or other cause-du-jour issues that are sucking us dry, it is things like this that are nickel-and-dime-ing us to death! No wonder the middle-income class has stopped progressing in its quality of life in the past generation, and the lower-incomes have slipped even further.

This is just another scam, and it is time to let our elected representatives know that they'll be out of a job if they continue to allow it.

Another consideration is that the clearing house for insurance claims that are used to rate driving risk is owned by Equifax, the credit reporting company

I am a builder, I make lots of money, have lots of cash & virtually no debt but my credit score is low. I do not care. I pay cash for most things, I own my house outright as well as my cars. However, I choose not to deal with the farce we call "credit agencies" as I feel they are a waste of time. I have not had a wreck in 10 years and I do not have any points or tickets on my record. Why should I pay more? This is legalized extortion and everyone should get a refund for these excess fees we are being raped with by the insurance companies.

What about people like me, a single parent of two kids, working 40+ hours a week, but I often run short/behind on bills, and I must make sacrafices just to stay afloat. But with that said, I am 31 years old and have never had an insurance claim, as I've never been the cause (or found at fault) of an accident. My driving skills are no less attuned than someone making twice my income. It's because of these kinds of outrageous premiums that I drive without car insurance, I simply can't afford their rates.

It's simple. Write your congressman, and reps, ask them if they think it is acceptable, and if they are going to do anything about it. Then vote them out.
This is a pretty straight forward discrimination lawsuit waiting to happen. It is so wrong in so many ways.

This is discrimination. It's discrimination based on wealth. So guess what, it will be allowed. Because the guys making the rules got it.

I have a very poor credit rating, I couldnt sell my home when I had to go on disability, I had to move someplace cheaper. But I have never had an at fault accident in my life, only 2 claims in over 12 years (one for a broken windshield from a rock a truck threw at me, the other wasnt even filed against my insurance, for my neighbor backing his car into my parked car) Guess what, that's called an accident btw ;-) Over all I calculate the payments to insurance to be about 40k since I started paying insurance, and total claims to be, oh.. a thousand?

Welcome to America, even during the depression insurence companies were and still are the saftest place for your money cause they are greedier than you. In Denver they had a 3 million dollar hail storm and even had the guts to complain with 1 million customers paying 100$ a month, do the math to see just hope much they really MADE!Just like ID theft it will happen until the F.C.C. does there job and it seems more profitable for the members than to protect the people but like pharm companies they only offer a pach not a cure,All Hail the Greedy President who has had the opertunity and the power in the party to effect change and they chose lies and deceet wanting one ruling CLASS the Rich!You are your credit no matter how yous there are or how many there arn't but then explain the insurence for teenagers who have had no credit, i know, double the price? "We The People" do not matter in a world of greed!

I had wondered why I was not being charged more for car insurance since I went thru bankruptcy a few yrs back (compliments of 9/11, was layed off twice and about to go #3). I live in one of two states where it is illegal to use credit scores to determine premiums. I think it is part greed and part something else. Fifty years ago growing up near LAX, everyone knew everyone else in the hood. Your insurance agent was not far away and knew you. Less traffic meant less accidents. Your insurance company office was in your town. With today's bloated population and insurance companies like Geico having one main office in who knows what state and maybe satellite offices around town somewhere in the gigantic populous, they don't know you from beans. So it is a win-win situation for them. They get to know you thru a credit score (to weed out bad risks) and charge every one more to boot. Insurance used to be about covering loss of goods and life; but as some one recently blogged, it has now become another money making scam benefiting only those at the top of the company.

There is a high correlation between eating ice cream and drowning - what these two actually have in common isn't eating ice cream causes you to drown but that they both activities increase dramatically during the summer time.

But what sounds like may happen in the future is that you will go buy some groceries check out with a credit card. The credit card company sends the info over to the insurance company which flags "ice cream purchased" then increases your homeowners insurance policy by 10% because of the strong "correlation" to drowning.

Welcome to the new world order.

I don't understand the problem. Insurance companies are in the risk mitigation business. Some actuary somewhere probably determined that people with low credit scores get into more accidents and are less likely to pay on time. If you are uncomfortable with an insurance company seeing your credit score, then pay the higher price and stop complaining.

In reality, this is no different than my insurance company (USAA) limiting its clientel to military, ex military, and military dependents. Their actuaries determinied that people with military backgrounds are better risks. Therefore, the costs are lower for them, and the savings are passed on to their clients. If I tell USAA my military background, then I get to pay $600 a year for the insurance on my family's cars. If I decline to tell them (or object to telling them), then I get to pay Allstate or Geico $1500 per year. Is this unfair to pacifists and non-military types. Yes it is. Do I care? Not really.

Basically, nobody is forcing anybody to give up private information in this case. Everything is a cost/benefit analysis. If you mind giving up your credit history, be prepared to pay more for insurance. If you don't mind, then at least be sure that the discount you are getting is worth it.

BTW, I'll mention here that I ran into a bit of financial difficulty last year and messed up my credit rating a bit. USAA didn't change my insurance costs one bit, and even offered to drop my credit card APR a few percent because I had been a good, lifelong customer. There are reasonable people and companies out there if you take the time to find them and work with them directly.

Seems to me that this is very counterintuitive. Often the people with the lowest scores are people who have recently suffered a personal economic hardship, (family medical emergencies, loss of job, death of wage earner, etc). While some are chronic credit abusers, recent studies say such people are in the minority of bankruptcy filers.

How does it make sense to make it more difficult for those in financial distress to help themselves out of that dilemma? Not only do they have to pay more for manditory insurance, they must pay more to buy the car they often need to get to work, they are also denied jobs since credit reports are becoming a condition of employment, and they are denied apartment rentals since credit reports are used there. They are denied at banks and must use check cashing places that charge a high premium, and even charged more for medical bills.

My, what a dystopian world we're in now, those with the least pay the most and those who can most afford the burden pay the least. Seems as though poverty, illness, and homelessness are now crimes punishable with life sentences in the US.

This is really aimed at increasing the cost of living for minorities and nontraditional families - consider how much more likely the white, nuclear family is to having a better credit score compared to a single parent minority family. Surprise!!

Checking credit to buy auto insurance is completely absurd. Not to mention unfair. Unless you purchase an auto policy and make monthly payments there is absolutely no reason to "pull" someone's credit.
Nevermind the fact that whenever your credit is checked you lose points on your beacon score, which doesn't make any sense either.
The purpose of a credit file is for potential lenders to educate themselves on your paying history & habits.
All the "experts" & bureaus claim that your score is determined by how you pay, what your debt to income ratio is as well as derogatory credit. So where does checking your credit or pulling one's credit have ANYTHING to do with their paying habits?
The whole credit industry needs to be over-hauled and now. Why do privately owned companies control our credit outcome?

AAA Insurance in Missouri uses this practice also. Along with a recent bill was a note saying that our credit score had been taken into account when pricing our auto insurance. I had all the same questions -- what did our credit score have to do with anything and how did it affect the bill I just received? Our score "should be" fine, but who knows what they're is looking for? And when did I give them permission to look at my credit info? Ah ha, back when we moved our homeowners' insurance to AAA for the "combined policy" discount, I'm sure there was something we signed that gave permission. But, certainly, no one ever told me that it would affect auto insurance as well.

I think it's a bunch of crap that I pay my bills on time, etc., like the posting above says (Do good-get rewarded....HA! What a ridiculous statement), BUT STILL have to keep an eye on my credit report because of mistakes that affect such things as car insurance, loan rates, and everything else under the sun here lately.

Bad driving is typical of the poor, who usually have lousy credit ratings. For many years I've driven to a nursing home in a poor area to visit relatives. Those folks have no sense of courtesy; therefore, no one uses turn signals, up to 5 cars run every red light, and on that area's freeway, cross over 2 or 3 lanes to exit. It's all about what's convenient for them.

My sister was hit driving to the n home to visit. The driver was arrested for past drug warrants and had no insurance. Texas.

Insurance companies collect the premiums and invest them in the stock market. When the returns from the stock market are low, they tend to make up the difference by increasing rates. Just like the credit scores, that has nothing to do with the driving records of the customers but it's just another exscuse to charge them more.

If the reverse was true and you got a discount for a poor credit score would everyone who is against this still be feel the same...probablly not.
Now, I am trying to figure out how everyone who responded can all be good drivers when I know I'm the only one that knows how to drive...

Ironic that there is a Geico ad right next to this article!

You know, if we all quit paying auto insurance and medical insurance, then the lawyers and doctors (and insurance salesamen, execs, et al) would have to settle for what we deem necessary and the free market would dictate the setting of prices - not a bunch of lawyer/legislators.

Credit scores, low ones, high ones, insurance rates, too high, unfair.....yada, yada, yada. This whole thing is just another high-falutin', semi-scientific "statistical" way for the suits to rip us off and try to justify it with a lot of feldercarb. It's theft using the intricacies of the capitalistic economy. If they can manipulate the market by being able to "quote" a study or a statistic or a "market trend" and charge us more money AND get all of their "competitors" (LOL) to buy into the same line of baloney, they will. And yet another fee or charge is added to what we have to buy. Three hundred years ago, these corporate types would have been more accurately called "highwaymen", i.e. thieves and blackguards.
But, here's a cheery thought: Just consider the enormous bonus that the vice president, in charge of "whatever", who first thought up this particular bit of skulduggery, received from a grateful "CEO": "Foosbuster, this is a great scam! We'll make hundreds of millions more a year with this gimmick, and those stupid customers can whine all they want, but it won't change a thing!!"
Too bad we don't really have a competitive market anymore.

Credit inquiries by insurance companies show up on your credit report as inquiries but do not negatively influence your credit score. You are not applying for credit - only shopping around for insurance. Car insurance is mandatory in many states and, unlike an application for credit, not a matter of choice.

In response to Steve H: from what I know, shopping around for insurance will not hurt your score since they pull what is called a marketing report. This is the section on your credit report that indicates which company saw your report and that it did not affect your score. That is different than a flat out inquiry that you HAVE to authorize or you can dispute with the Credit reporting agency.

Does that apply to only natural blondes, or would bleaching my hair make me a safer driver?

(or maybe blondes have fewer accidents because other drivers are paying more attention to them!)

Exactly how is getting a lower rate on insurance because of a higher credit score any different than getting a lower interest rate on a loan because of a higher credit score?

I work in the credit industry and can tell you that the only credit bureau that actively provides credit scores to insurance companies is Equifax.
Equifax can not compete with Experian or Trans Union, so they moved into a new niche - giving information to insurance or any other mass industry that may find a way to use our credit information against us.
You can go to www.freecreditreport.com and see a copy of your reports - you will have to pay extra for the score. Recently the three credit bureaus joined together to create their own scoring model. As of right now they purchase their model from FICO or Beacon. The new model is completely different and according to them it will be a more accurate score. I am curious to see this new model - to me it is a way to keep more money in house - they do not have to pay the other companies for the score.

Please understand that your credit score is not actually how your credit is - it is how your credit ranks compared to everyone else who has credit. Everyone reading this article is having their credit report compared to each other.

We are a society out of control and allowing ourselves to be controlled by numbers and big business.

I do not have an answer as to how to solve this - just wanted to share the facts as I know them.

We are screwed any way we look at it - we pay our bills or not - we still get the raw end of the deal.

Geico's corporate office is down the street from me and I know many people who have and still work there and they say it is not a good place. I would never deal with them.

Good luck to us all to figure out the secret code all these companies are using. Of course we will figure them out and then they will change again. SIGH!!

I have complained to the KS Dept of Insurance on more than one occasion about this practice. An apartment resident tends to have a lower score than home owners. Credit bureaus do not report reasons for entries. For example if a bank adds service charges and you change banks because of that, the only thing the insurance company notes is you closed an account in less than 12 years and therefore you must be an unstable credit risk. Credit bureaus do not remove mistakes quickly and are not fined for wrong information. Credit bureaus do not give explanations. Credit bureaus do not record positive actions like if a loan is paid off early. Credit bureaus do no exlain if a change of employer occurred because you changed jobs, got fired, or your company was bought out. Mergers and buy-outs make it look like you cant hold a job down. Credit report statistics without correction and explanation can be made to look like anything the insurance company wants it to look like.

The 9th Circuit Court case is:

Reynolds v. Hartford Fin. Servs. Group, Inc., 435 F.3d 108

I am 61 years old and divorced. Due to major financial problems resulting from the divorce and subsequent quad by-pas heart surgery, my credit score is low. But then it was low when I was married to the jerk too!! I have been driving since I was 17-----do the math. In all those years I've had exactly ONE accident. And it was my fault. My neighbor's brick mailbox jumped off the curb and ran in front of my car!! Did a tiny bit of damage to the bricks but lots to my car. Since I can't afford full coverage, I had to pay for all the repairs. It never occured to me that my credit score might have something to do with why i can't afford full coverage!!

After reading most of the blog it appears that most people don't realize how powerful the insurance lobby is in Washington. I wonder how the goverment would handle the insurance industry if the powerful lobbyist didn't have the lawmakers ear?

I can't speak for Hawaii but California DOES use this practice--all the time--I've been subjected to higher rates based upon my credit--AND I've had the underwriter ask me questions while she ran my credit history over the phone--ALL OF THE INSURANCE COMPANIES ARE CROOKED--GEE, WHY DON'T WE PAY THE CEOs OF THESE COMPANIES MORE MONEY--ESPECIALLY WHEN THEY LEAVE!!!!!

It's all Babylon. The come-uppance is coming.

Sometimes I wonder about the decision makers who do such things as tie insurance prices to credit ratings. While there may be a correlation between people with low credit scores and high insurance risks, is that correlation accurate enough to be fair to everybody?

We really need to challenge such decision makers to provide the numbers behind their statistics. While they may say that there is a correlation between credit ratings and insurance risks, can they prove it with solid statistics AND the data that went into creating those stats?

I suspect that an indepth analysis of the data would show that the worst risks have a higher probability of having the worst credit ratings. But I also suspect that Pareto's Law will come into play and show that ten percent of the worst credit ratings are responsible for ninety percent of the claims.

By 'reframing' the statistics to look at total claims versus credit ratings, an insurance company could 'justify' charging everyone with low credit ratings more money to cover the losses caused by the few. While this 'actuarial' approach is valid within reason, it unfairly penalizes people who have bad credit ratings because of errors in their credit reports, identity theft and lack of credit history.

What is even worse is the fact that your credit rating apparently can be jeopardized by too many inquiries. Imagine having your insurance rates AND your credit card rates go up because there is 'excessive' activity against your credit report.

Things are getting to the point that a minor change in your credit report can have a major impact on your financial health. Imagine someone who is in debt yet managing to pay their bills on time being innundated with extra costs because of a credit rating change. The extra costs may cause them to NOT pay their bills, thus lowering their credit rating.

It is a frightening scenario.

Credit is predictive in insurance risk models. You have the right to dispute your credit and have your insurance rate recalculated if inaccurate information caused you to have a higher rate. If you have been with the same company for a long time, they probably did not run your credit. With the exception of Allstate most companies will not run your credit if they never did in the beginning. The hits on your credit report do not count the same as if you were applying for a loan. It is definitely prudent to check your credit report every year.

Well of course people with low credit scores don't try to be bad drivers! But it could be true that people with low credit scores might drive around in older vehicles, that could need repair or even new tires. A person with low credit scores could be less able to pay for maintenance on their car as quickly. And perhaps that would lead to more accidents. It doesn't really matter, if the correlation is there, then the people LESS likely to have accidents shouldn't subsidize the people MORE likely to have accidents.

And it is rediculous about the paranoia about insurance companies. If they are cheating us out of all these dollars and profitting massive profits, would basic supply and demand say a competitor could come in cheaper and steal their business? These companies are just trying to be as efficient as they can and to predict loss as best they can so they can offer lower rates and win your business, or to identify bad risks and price accordingly.

I think they shoud get back to the fundamentals of auto insurance and that is the individuals driving (I REPEAT) driving record, your credit history has nothing at all to do with how you drive, when they learn this then maybe the individuals with no accidents or traffic violations will get a cut on their insurance.......What they are doing with the credit score is ridiculous....and its time to stop it....

It is not just auto insurance, but home owners too. Got a substantial discount when I allowed them to use my credit score. Hope it keeps burglars and fires way too.

Almost 3 yrs ago, while insured by Allstate, I received notice (on a weekend) that mine & my husbands rates had gone up with no explanation. I promptly phoned the 800 # and was told by the person answering that it was "Some state regulations have changed" and they subsequently had to increase our rates. Not satisfied, the following Monday, I phoned my broker and asked the how could the rate have gone up having filed no claim and not having any tickets for either one of us? My broker replied that my credit score must have gone down, they assumed I was a risk, and raised my rate. I then inquired who gave them permission to run our credit (we did not); and as long as their bill was paid on time every month (directly out of our checking account) who else I did or did not pay was NONE OF THEIR BUSINESS!! I switched to Geico that afternoon and have not had any problems since. I feel that this was an unnecessary invasion of my privacy and trust as a customer, no one should ever treat you like that.

You would think that with quasi-blogs such as these, people would start to see where the puppet strings lead to, get very upset, and actually do something about it instead of troll around on the Internet and complain about it. Remember, people - you DO have a choice.

We need a law that ensures that data can ONLY be used for the purpose for which it is collected. This would prevent insurance and other companies from applying credit data to differentiate what you pay for various services.

In the absence of such a law, there will be many other situations in which your personal dossier -- held by Choicepoint and other companies without your knowledge or consent -- will dictate your fate. Your life will be constantly impacted by this shadowly digital dossier and you won't even know it.

Folks always mention "Big Brother," but that is the wrong paradigm to be concerned about. Kafka's "The Trial" is what threatens us all.

Throughout this thread there has been WAY too much concern about the impact of inquiries on a credit score. Inquiries count for just TEN PERCENT of the credit score. STOP WORRYING SO MUCH ABOUT INQUIRIES!!! Keep things in perspective folks. There is another 90% that you - foolishly - aren't even considering here.

I would love to see the FACTS that PROVE that because I got a divorce and lost my job in the same year (thus lowering my once stellar credit score) that my driving skills decreased along with my income. This credit based pricing is nothing more than insurance company executives padding their profits at the expense of the Average Joe. You can thank Progressive for this lovely practice, since they started doing it first. I guess thats where Peter B. Lewis gets all that extra money he likes to throw around to be 'philanthropic'.

I have had credit problems in the past but never had so much as a parking ticket in 20 years of driving. Your credit report does not indicate what type of driver you are. If they want to raise rates, they should raise them based on claims or not paying your premium on time, not because you missed a credit card payment.

Folks need to get smart and shop for your insurance
the way you would shop for something else. Rates are
based on numerous risk factors, and it looks like credit scores would be one of those factors. Don't
assume that because you're with ACME company with your
car, that they would give you the best rate for your house, health, rv, motorcycle etc. You may have to have different insurance companies for different products. You certainly wouldn't want to insure an RV
based on automobile risk factors, as they are much
higher than RV risk factors, so you go to an insurer
who specializes in the RV product. Same goes with
health, you will get a better rate from a health
specialized insurer, than your home insurer. And why
do you fall for that line "we can save you 10%, guaranteed". Sometimes it works, but most of the time,they get it back 2 times over when you renew.
Do some research, you can, in fact do the research and
do some comparisons without have a credit score run.

First of all, I am an insurance agent for a company in Indiana that only does business in Indiana.

1)For those who argue that low credit scores do not equal worse drivers, you're right. What they DO equal, on a smaller scale, is the fact that for a $750 claim, when you have a $500 deductible, the lower credit score customers are MUCH more likely to file a claim than those with a higher credit score that would rather just pay the extra $250, and keep their rates lower.

2) the BIG insurance companies are now using credit scores as a much larger component of how they figure rates. Many smaller comanies use credit scores, but it counts a lot less towards the rates. For example, my company does not use credit scores on autos (yet) but is coming out with a new "upgraded" policy option that will. Why? Because the Allstates and Geicos and State Farms of the world are giving HUGE discounts to those clients with perfect driving records and high credit scores, that it is very hard to stay competitive when rating JUST on the driving records. In homeowner's, my company uses credit score as a much more minor component of your rate. More depends on claims history.

3)EVERYTHING in the insurance industry is driven by numbers. They are not just pulled out of the air. If the BIG insurance companies give huge discounts to those with higher credit scores, there is a documented reason. Maybe they are no better drivers, but they statistically make fewer claims. Period. Insurance companies are about the bottom dollar, and if they can afford to give breaks to those who have higher credit scores, they will. At the same time, I personally don't think it's necessarily fair what some of the big boys are doing, but guess what? There are THOUSANDS of insurance companies. If you don't like getting dinged for credit score issues, move your business elsewhere.

Sorry, it's the world we live in. The only thing that will tell insurance companies to change their ways is by taking your business to another company and let them know why.

Insurance in general is an out-of-control sector of the out-of-control financial services sector of our economy. It's all designed to gouge average people and make obscene profits for lawyers. The best idea I ever heard for vehicle insurance was by someone who posted here: national no-fault liability insurance, financed by a tax at the pump, resulting in no more problems with uninsured motorists, and no more obscene profits for the lawyers who are the only ones to profit from the current system.

You can shop around all you want. An insurance inquiry does not affect your credit score.Because you are not applying for an additional line of credit, there is not penalty applied for the inquiry.
It will show up on your report as an insurance inquiry.

I know for a FACT that if companies like Geiko do not inform consumers prior to electing service that a credit check will be done is totally against the law. I hope every customer of Geiko who has business with them, and were not informed of this credit check tactic, file a class action suit against them. Consumers MUST be informed that a credit check will be done for consideration for business, and actually give consent first.

I love that I pay less for insurance because I have perfect credit. I have ZERO sympathy for someone who can't maintain good credit.
*also when insurance companies or employers etc... pull your credit it doesn't effect your credit score! (It's a different type of inquiry!) So how about everyone stops whining about stuff they obviously don't understand and go pay a bill or something-

(From one who does see the raw data on a daily basis correlating credit scores with loss history)

Fact: Insurance companies do see strong correlation between credit and loss history.
Fact: Insurance companies who were late implementing credit as a pricing variable saw their business retain more of the "bad credit scores" and more losses (resulting in higher loss ratios, lower combined ratios)

Solution: Make credit an offlimits rating item for ALL insurance companies like they do in California. Otherwise, an insurance company is exposing itself to adverse selection if it voluntarily decides not to have it. Anyone who says otherwise have not seen the data.

I am an insurance Agent. I find it very painful to read some of these comments. I don't agree with Credit Scoring myself but I am not the insurer just the Agent in the Agency Representing the Insurer. There seems to be a lot of customers out there that have many questions as to what is what when it comes to their policies. Please remember your Agent is NOT the bad guy only the messenger Don't be afraid to ask questions when it comes to your policy. And don't be afraid to ask for requotes every term if you belong to an Independent Agency. Just to clear 1 thing up. When your Agent runs Credit Score to determine premium, we do not see anything other then the Credit Score Number. Sometimes not even that. Funning this score does not cause a "hit" on your credit report. It may show but does not impact your credit.

Gouging the consumer is what the insurance companies are doing until they are stopped by legislation. Once this deceptive practise is stopped, I will never do business with past insurance companies ever again!! Geico runs your credit scores even when you tell them they have no permission to do so. They send a customer service letter saying their representative will go thru remedial training. That is lying to the consumer. Contact your political representative often and now to stop this nonsense.

FYI: my wife is an insurance agent. And yes, this was a bit of an eye-opener for me as well when she advised our credit would have to be run to get coverage when we changed carriers.

However, while I am not defending this practice, I think perhaps an inordinate and undeserved emphasis is being placed on this issue.

Firstly, the credit run does not pull your FICO score, it pulls a range score, or 'high-level' credit score on a range I believe from 1-6. Six being perfect, one being ultra-poor. Additionally, these pulls DO NOT affect your FICO score. They show the same as pre-approved credit-card pulls. They show as an high level inquiry and do not affect your score the way a FICO pull would for a mortgage or car purchace (I.E.-a certain number of points per pull).

Additionally, in reality, MANY multiple factors decide your insurance rates, not JUST your credit score. In fact, your credit score makes up a small part of how you are scored for a rate.

Generally, you are scored on a combination of high-level credit score, driving record, insurance record (chargeable accidents, have you dropped your insurance, let it lapse, had a gap with no coverage, etc., which can weigh FAR more heavily than credit scores), how long you have had your license, has your driver's license lapsed, the make and model and options package of your vehicle, your geographic location (which has burned me in the past), and other factors.

For example: Two males, 35 years old, buying two identical 2006 Mustang GT V-8's.

One has a great driving record, never had his insurance lapse, never let his driver's license lapse, but had a 2 out of 6 credit score.

The other has an equally stellar driving record, let his insurance lapse due to an unforseen issue (sold the car and rode the train to work every day for 6 months, for the sake of argument), let his license lapse in that period and had to re-apply, but has a 5 out of 6 credit score.

Guess what, guy number two WILL pay more. He is a risk. He's a risk as he may let his insurance lapse again, as he did before, which means he has the potential of ceasing as a paying customer. And in insurance, as in banking, the only way to make money is to keep a customer for a long period of time.

Insurance is a losing proposition in the short term. They make money by taking your premiums and investing them. If you lapse, or jump ship, you are an equal or greater risk than if you have poor credit.

Bottom line is, as my wife told all of her customers, SHOP AROUND. As was mentioned in this article, most people pay TOO MUCH for insurance because 80% take the first offer they get. Shopping around WILL NOT adversely affect your credit (as I mentioned above), and more importantly, can save you a BOATLOAD in cost. We saved $600 a year by changing companies. For BETTER coverage! A little research, some knowledge of insurance policies and lingo, a little research, and good old patience is worth SO MUCH MORE than worrying about the arbitrary and often incorrect, and incorrectable, FICO scores.

Such is my 2c.

I do, however, love the articles. THanks for bringing this to light so a proper discourse can be had by all.

I am outraged that so many companies have access to my social security number and credit report! I have spent over two years trying to clear identity theft from my credit reports, which are a completely inacurate depiction of my credit. This would make any correlations or comparisons completely inacurate as well. The insurance industry should rely on facts to devise pricing tiers. Greed is abundant.

INSURANCE COMPANY'S SHOULD ONLY BE ALBE TO SET RATES ON DRIVING RECORDS, AND CREDIT SCORES SHOULD HAVE NOTHING TO DO WITH IT.

Wow, now I know why I have been getting ripped off all these years. I don't take loans, I pay for everything up front I own my car and my motorcycle combined they are worth over $30,000 that I own and am not paying on but I pay a higher insurance rate then my friend who is under 25 while I am 33 and he has two DWI's and one for driving into someones house and I have only gotten three speeding tickets since I was 16. So I have to pay more because I won't take out a loan.

It's very simple, insurance companies do not look at it as an individual thing, but they know for a 100% certain fact that people with lower credit scores have more claims. That does not mean every person with a lower score has more claims, it means that in total they have more claims and therefore are a greater risk. Opposite is also true,, some people with high credit scores are terrible risks, but as a group they are a lower risk.

I am an excellent driver with an excellent driving record. I have lousy credit though. I didn't realize the correlation between the two until last year. I moved from the Bay Area in CA to outside of Atlanta. I switched my Allstate policy from CA to GA (obviously) and had to pay almost twice as much for six months. There is something seriously screwed up with this when moving from somewhere so expensive to someplace with a much lower cost of living would necissitate a doubling of my insurance policy.

Driving records should take precendence over credit scores, but considering that GA loves its big business, nothing will change here.

The number one reason for bankruptcy is medical bills. For those who are arrogant about others' bad credit, may you never know the burden of unfortunate circumstances. Or, maybe you should! I happen to have a good credit score (780) but know wonderful, responsible people who have had tragedy affect their financials and thus their credit scores. Insurance of all types MUST be reformed.

This may be news to some but it is not a new practice at all. What people do not realize is this is just the tip of the iceberg. Many people are not aware that credit card companies can and will raise your interest rates based on your credit with other companies. For example, you pay your credit card bill on time, every time. Maybe you are using your credit cards more frequently or even have had a series of credit inquiries which lower your score. A credit card company will increase your interest rate based on your credit score even if you have never missed a payment or been late. Their justification for a higher interest rate is a lower score means more risk. Yet in turn they raise your interest rate, make your payment higher, and more difficult to reduce your balance. Recently a law was passed making it more difficult for consumers to file chapter 7 bankruptcy. Which is basically a fresh start and debt elimination. This was great news to the credit card industry. What most people don't know is that the credit card companies are prepared to write off a certain amount of debt based on statistics. They adjust fees, interest rates and other charges to offset this amount. Now that less consumers can eliminate their debt, credit card companies will not have to write off as much consumer debt as in the past. Who has seen a reduction in their interest rates or service charges because of this new law? Quite the contrary, more companies are charging more for the automated online payments that most people now utilize to pay their bills. They can reduce the number of employees it takes to process payments but increase the cost to the consumer. Annual fees, online payment fees, higher interest rates. They extend the credit to the consumer but be aware, if you use it they just may penalize you for it.
Don't get me wrong, there are people who abuse credit, do not intend to pay their bills, and even commit fraud and they should be punished. Companies have the right to protect their interest. But who is protecting the interest of the averege consumer who is trying to do the right thing?

It is all bunk. I had The Hartford through AARP. Without an incident and my credit score did not fluctuate my premium went up 25%. A year later I switched and was paying 25% less. Supposedly it is my nine digit zip code that caused the increase, but that's illegal isn't it? Redlining.

I'm a bit surprised by the number of people who had no idea this was a standard policy of insurance holders. Anytime a "service" is issued to a consumer in which the service provider is providing coverage (and possibly out-of-pocket costs), a credit check is a fair and accurate way to determine that particular clients financial responsibility. While your credit score may not determine your ability to drive (I've seen plenty of rotten drivers in Porsche's) it WILL determine your ability to pay on a claim.

Your credit score is not only used to determine what you qualify for regarding mortgages and insurance, but also gym memberships, home and cell phone plans, cable TV and even whether or not you'll get electrity turned on in your home without a deposit.

The bottom line is that if you live within your means and pay your bills on time, you'll be fine. You don't hear me complaining about not getting the "non-smoker" discount.

America is faced with fraud, raising prices, low wages, political crooks in the government, gasoline prices, war, education, drugs, insurance cost, raising medical and drug cost, medicare and medicade getting reduced more and more, Social Security on the edge of disappearing, illegal immigrants costing Americans millions of hard earned dollars to support their illegal families for medical cost, food stamps, free education all at the cost of the taxpayers. Before long the Hispanic will become the miniority according to Time magazine. And with the illegal immigrants this will help it along. Americans wake up and see what is happening to your country. Do you want your country ran by illegal immigrants? Do you want more illegal drugs in our country? Do you want more unwanted pregancy's to support? Then wake up and make our Representative of whom we elected to change the law of illegal immigrants, the insurance rates based on credit ratings, we have the power to relect him/her. COME BACK AMERICA TO GREATNESS-WE HAVE THE POWER-WE ARE AMERICAN CITIZENS. WE CAN ELECT WHO WE WANT TO MAKE CHANGES IN OUR GOVERNMENT TO MAKE THIS A BETTER TOMORROW. MARTIN LUTHER KING "I HAVE A DREAM"
To see my country in better hands, with a future. Today, it is not in goods hands, not with a good future.

"Credit Score = Morality" is a nice little piece of b.s. legerdemane which has cost me several jobs since I was forced to declare bankruptcy in October of last year, because as part of "checking my references" the potential employer ran my credit score, and decided I must be a criminal based on that alone.

I'm so delighted to know that I will soon be paying up to half again as much for insurance because of my "criminal tendencies" as dictated by my credit score...

What a total scam.

I am an insurance agent in Washington State and prior California underwriter and I can tell you that there are very few companies left that do not run "credit score". We agents don't actually see the number, just a code like 1B or 4A.
There is up to a 50% discount for good to excellent credit. Insurance companies have had to prove to the states depts of insurance that credit score has a high statistical correlation to accidents. It is in fact a better predictor of future accidents than your past ticket and accident history combined! As an agent who cares about my customers - my motto is: "I LOVE TO SAVE YOU MONEY!", I really feel for customers who have had a medical or divorce situation through no falut of their own and received a quote twice as much by the same company on the exact same house. I work hard as an agent to maintain several different choices of preferred companies that weight credit scoring differently so that 90% of the time I can offer substantially lower rates for home and auto insurance. Usually however, the better the credit score is the more I save them. Typical savings is $200 -400 year especially over ccompanies that have the most well known names. I am happy to do business with any homeowner in the state of washington who wants to save money and has a good to excellent credit score. My statisical likely hood of being able to save them a substantially large enough amount is very high. Eric at leavenworthinsurance@gmail.com

I've read all about the credit score numbers correlations; I've even examined them myself. They are deadly accurate, much more accurate than any other tool(s) previously used (i. e., driving records, occupations, etc.) For a significant percentage of the motoring public (maybe 35%), credit scoring results in lower premiums; for the bottom ten per cent, though, the premiums are much higher, although not high enough. (For those in the middle, not much difference at all.) Why? Don't know, nor is it important to insurance companies. But, if you do some research, you'll find that financial straits/stress is highly correlated to suicide, divorce, domestic/spousal abuse, workplace violence, and various diseases both mental & physical. The focus on insurance premiums is misplaced. Insurance companies don't cause accidents; their premiums only reflect the cost of such. Instead of wasting engery arguing credit scoring validity (which you really can't because it is virtually unassailable), legislators/regulators would better serve the public by recognizing that financial duress is the disease that needs attention.

I had a good laugh a few months ago. I kept getting these mailings "15 minutes can save you 15% on your car insurance". I went online & filled out the info. they asked for. The rate quote I got back was nearly 3 times the amount I currently pay! Needless to say they didn't get my business. Maybe they assumed I'm a bad credit risk because I'm single.

If you want to lower your car insurance premium, just total your car before it's paid off. Your credit score goes up because you paid off the vehicle early with the insurance check & the insurance company recognizes the new credit score.

No, this is not a joke. It actually happened to me, by accident of course...

I am very suprised by this and in some sense not. In Manitoba Canada, we have a government run auto insurance . It works perfectly in which insurance is purely based on your driving and claims for that particular vehicle type. There are only 3 provinces in Canada with this type of insurance (which by the way is the lowest car insurance anywhere in Canada, compared to insurance provided by corporations), some of the other provinces wanted to go the government run insurance route but as always in your case and in Canada, "Money Talks".....Remember who you are voting for.

The bottom line is statistics. If its ok for a car insurance company to charge more money for a 16 year old driver becuase statistically he is more likely to get into an accident,then its ok to use credit in that same way. Its all or nothing you either accept using statisitcs or you don't across the board. I disagree with the outrage. If you are responsible you are responsible and that will translate to driving, fiances,school and everything else is life.

I, for one, believe that credit scores are appropriate to use in insurance pricing. The principle of using the "best available data" to make decisions applies to everything, and (for better or worse) credit scores and the individual reports upon which they are based are among the most reliable across-the-board information available to individuals, organizations, or corporations assessing risk in any given financial transaction or agreement. I'm sure that an individual's behavior with respect to driving has more impact in setting automobile insurance rates than their behavior in their finances; any business that would base their rates solely on credit scores would be out of said business fairly quickly. There are far worse "Big Brother" scenarios possible today: imagine a company (and there are already those doing this) aggregating grocery store "Shopper's Club" data selling their reports to insurance companies. Would those of us who buy fresh fruits and vegetables pay more for auto insurance than those of us who more frequently buy, say, beer and potato chips? Although raw statistics are the necessity when dealing with the general population at large, what really matters and what doesn't really matter will eventually play itself out in the market. After all, the insurance industry is _highly_ competitive. Do yourself a favor, and shop around.

I, for one, believe that credit scores are appropriate to use in insurance pricing. The principle of using the "best available data" to make decisions applies to everything, and (for better or worse) credit scores and the individual reports upon which they are based are among the most reliable across-the-board information available to individuals, organizations, or corporations assessing risk in any given financial transaction or agreement. I'm sure that an individual's behavior with respect to driving has more impact in setting automobile insurance rates than their behavior in their finances; any business that would base their rates solely on credit scores would be out of said business fairly quickly. There are far worse "Big Brother" scenarios possible today: imagine a company (and there are already those doing this) aggregating grocery store "Shopper's Club" data selling their reports to insurance companies. Would those of us who buy fresh fruits and vegetables pay less for auto insurance than those of us who more frequently buy, say, beer and potato chips? Although raw statistics are the necessity when dealing with the general population at large, what really matters and what doesn't really matter will eventually play itself out in the market. After all, the insurance industry is _highly_ competitive. Do yourself a favor, and shop around.

Due to a variety of uncontrollable circumstances my credit score sucks... but I have a 25 year perfect driving record... oh yeah, and I'm a brunette!

Ahhh! Why did you mention those statistics about brunettes? I'm a brunette and now my insurance rates are going to go through the roof.

If you have any data about short people, Star Trek fans or people with cats, please keep it to yourself.

My experience showed that the insurance company did not look at my credit report, but their contractor Choicepoint did. Choicepoint misread their own data and I spent 6 months involving everybody including the state insurance commissioner to get the right rate. Take a look at choicepoints web site and some of the reasons you can get a rate hike. It's not just about the credit score.

AMAZING! In the time it takes to read a one-page article, we have a slew of people who became fully-qualified actuaries! All these people who know for a fact that there is no correlation between higher claims cost and bad credit. Wow! And to think...all of the actuaries crunching numbers to establish this correlation had to go to school for 10 years to learn this stuff. A bunch of people, with no knowledge and information greater than anecdotes and rumors, think they know better than experienced mathmatical experts. OK, sarcasm over.

GROW UP PEOPLE! If you don't like paying more for insurance, that is fine. But don't ask me to pay more so you can pay less, just because you have credit problems. If your poor credit is due to unfortunate circumstances, you have my sympathy. Just don't demand my money, too.

In 2003, the executive director of the Council for Economic Justice in Austin, Texas, in a report to the Ohio Civil Rights Commission, described how "the 'evidence' supporting the correlation claim comes almost exclusively from insurers, insurer trade associations, and credit scoring vendors who refuse to divulge the methodology of their studies, details of the study results, and/or the underlying data for independent verification....For those studies about which some information is known, the industry becomes suspicious. For example, Fair, Issac and Company continues to bring out the Tillinghast 'study' as support for the correlation--even though the National Association of Insurance Commissioners Credit Report subgroup dismissed the 'study' as 'counterproductive and misleading.'" Another author explained that although "economic conditions vary greatly by geographic region, credit scoring models are deployed on a national level. One survey showed that "in the fourth quarter of 2000, mortgage delinquencies in the South were almost 60 percent higher than in the West. Consumers with high credit scores in a region with weak economic conditions were more likely to encounter problems than consumers with lower scores in a region with stronger economic conditions." He also described how "in 2002 he [California Insurance Commissioner John Garamendi] brought a formal action against Allstate for its use of credit scoring in homeowners insurance. Garamendi charged that Allstate's proprietary score 'in underwriting or tier placements results in excessive, inadequate, unfairly discriminatory, or unreasonable rates.'...In possibly the first order of its kind, Administrative Law Judge Lisa Williams ordered Allstate to to reveal its scoring algorithms to prove they were not discriminatory or unreasonable, Soon thereafter, Allstate settled, agreeing to stop using credit scores in setting homeowners insurance. It also agreed it would not re-introduce credit scoring unless it first revealed its credit scoring methodologies with the department."

My attitude towards insurance, well, I feel that the whole industry is a sham. Most of the high premiums and legal BS we have to go through is thanks to our friends in Washington and the state governments passing all kinds of cute laws, everything from mandatory insurance laws to coverage rules. I only bother paying for insurance because legally I have to carry it. Needless to say, I'm not too fond of our government in general. Credit scores being used in our insurance rates doesn't surprise me; they'll probably start using this data to determine health insurance payouts and maybe even rental rates in the future. Welcome to crony-capitalism (as opposed to real, regulated free markets as our founding fathers originally intended

Rates based upon credit scores or not, the cost of insurance has to be going up due to all the bombardment of advertising by the insurance companies. I see the GEICO Gekko or the Cavemen at least 20 times a day and watch TV for less then 2 hours a day. Then there are all the advertisments in magazines and all those annoying inserts, in your bills, web ads, etc. etc. Not to mention all the advertisment from Progressive and Allstate. All professing lower rates.
Everyone's rates would likely be 15%-20% lower if they moderated their ads.

I have read a lot of the above comments and feel I need to put my two cents in. I have worked in the insurance industry for over 5 years. My company has a credit based rating system for both auto and homeowners, and although I don't totally agree with the theory, I have shopped my insurance with companies that don't and found they couldn't save me that much money.
It is called a soft hit on your credit and doesn't change your credit score. People with no credit are put in the middle of the spectrum, because they have no information to base credit on. In most states they don't need your permission to run your credit, they are just required to tell you that your credit may have been used in determining your premium.
Premiums are based on lots of things, driving record, age, zip code, county, the age, make, model of vehicle, previous claims, and coverage. Every company looks and rates things differently. Rates change from one zip code to another, one county to another, and one state to another. Rates change from one policy period to another. The best thing you can do is ask your agent as many questions as possible.
Every company does things differently from one state to another, depending on what the state laws will allow. Every rate change, or fact the determines that rate has to be approved my that state's insurance department before the company can put it into affect.
My advice is that if you have a problem with the way any insurance company is conducting business in your state, then you need to contact the state's insurance department.

On my drive into work today I was listening to you on WMJI and one thing you mentioned you were incorrect about. You mentioned you must pay for a credit report. That is incorrect information because all the credit agencies offer a free report yearly. These aren't the reports you get online from those services but you can directly write the credit bureau of your choice to request on. I've done this for years and I've never paid a fee to Transunion, Experian etc.

Having worked in the insurance business for some time now, I have mixed feelings about the use of credit in pricing. For one, my wife's credit was largely ruined by her ex-husband, a situation mostly out of her control that continued after their divorce. But people need to take a step back and examine this objectively.

There is a spectrum of data that insurance companies use, or could use--ignoring legalities for a moment--in setting rates. Let's put driving record on one end of the spectrum and race or ethnicity on the other. Clearly your driving record has been accepted as a valid data source in setting rates. Not only does it bear a close correlation with your likelihood of having an accident, but it is also something within your control. We can obey traffic laws, the speed limit, and drive more carefully. And if we get into trouble a few too many times, we can take a defensive driving course to get those nasty points off of our license.

On the other end of the spectrum is race. This is what your constitutational lawyer would call an "immutable characteristic" - i.e. something that you cannot change. Is there a correlation between race and auto accidents? I don't know and I won't go there. But I will tell you that lack of a correlation is not why insurance companies don't use it. The only reason they don't use it is because it is socially abhorrent and against the law.

Now you may be saying to yourself - I always heard that unmarried males under 25 are the most likely to have an accident and therefore spend the most for car insurance. Isn't gender an immutable characteristic too? It certainly is. Is it illegal to use to set rates? Nope - at least not for young drivers.

What about age you ask? Well, this falls somewhere in the middle. It is an immutable characteristic in the sense that you cannot speed up the aging process. On the other hand, it's the same for everyone-we all get old. So there's no inherent unfairness in treating different ages differently because we're all going to be there at some point (we hope). Finally, what about marriage--immutable? Well no, not really. But I think people should now realize they might be a lot madder about their insurance rates if they were a 21-year old gay male, rather than someone with bad credit.

Back to my wife and her bad credit - it wasn't entirely in her control, as I said, but we're doing what we can to fix it. So where does credit fall on the spectrum above? Yes a person's credit can get screwed up through no fault of their own - but this can usually be corrected with time and effort.

The insurance companies don't care about the fairness of this system, they're simply using it to their advantage like everyone else. If people think that their credit report is inaccurate and too difficult to change, they should lobby their legislators for stronger consumer protection laws. For instance, most people had to PAY to get their credit report until the last year or two. This incensed me since the only reason these credit reporting companies exist is because of consumers supporting the economy like W wants us to. Clearly consumer credit laws have a ways to go. In the meantime, get married and be careful on the roads.

This site http://pianet.com/IssuesOfFocus/OngoingIssues/scoring/8-16-05-4.htm has some good information from the Insurance Industry side. Whether you agree or not it's information.

Curious that some in there comments refer to an "accurate" credit score. What is that? This is not the search for Planck's Constant. Credit scoring algorithms are proprietary, meaning you and I will never, ever get to see how they are calculated. It is well-known that you and your banker can pull your credit score on the same day and they will vary by as much as 100 points!

Credit scores are not "accurate" or "inaccurate". They just are...your big brother.

You know what? If you live in a large Metro area, you can tell the insurance companies where to get off. When I moved from Virginia to Denver, I was quoted car insurance rates that went from $64/Mo. to $250/Mo. (Yes, my credit is less than stellar and it definitely affects my rates since I've had one speeding ticket in my 15 years of driving and no accidents. One claim for