Consumers vent over credit scores leading to higher insurance prices

This is an archived article and the information in the article may be outdated. Please look at the time stamp on the story to see when it was last updated.
Data pix.

An old issue is getting a new push.

We all know that finance companies use credit scores to determine the likelihood that you’ll pay back a loan or credit-card debt.

But, auto insurance companies use your score for a different purpose - to predict the odds that you’ll file a claim.

And, if they think that your credit isn’t up to their highest standard, they will charge you more, even if you have never had an accident.

“I had a great job for many years and just being delinquent on a couple of bills can ruin your credit score," said Richard Newman.

Newman has a common story.

He was laid off his job, and money was tight.

“I’m one of those guys,” he said.

He was forced to make tough decisions for his family.

“I had to take a job way less than what I was working,” he said.

Newman’s credit set back may cost him even more when he renews his auto insurance, because companies factor in credit when determining insurance premiums.

It’s something that started in the mid-90’s - using credit scores to predict your 'future' driving habits.

“The problem is that info. is proprietary," said Kent McGuire. "They are not required to disclose it and, so, we are in the dark."

It’s a system consumer lawyer McGuire says is flawed.

“Somehow, they have determined, if you have a higher credit score, you are more financially stable," McGuire said. "I believe they want more financially stable insurers. Under the belief, they won’t file as many claims and they will pay their premiums on time."

The scoring system that insurers use varies from company to company.

It gives a score that legally they don’t have to tell you about.

“I believe the process right now unfairly targets low income families who drive, which is really unfair because there are really good drivers in the lower income category that shouldn’t be penalized unfairly,” he said.

A new study from consumer reports illustrates this example from Oklahoma, where drivers with clean records and credit problems are compared to drivers with good credit and DWI's.

It found drivers with bad credit and clean records paid more than those with excellent credit but had driving under the influence convictions.

It's why many are calling for change.

Oklahoma Senator Rob Standridge is proposing a bill that would make the scoring practice illegal.

There's no word yet on how much support the bill would get.

But, here's what Oklahoma’s Insurance Commissioner had to say in a statement:

“Although this rating metric seems at first glance to not have any link to insurance, insurers have found an incredibly strong correlation between certain credit information and the claims risk of consumers.”

California, Hawaii and Massachusetts are the only states that prohibit insurers from using credit scores to set prices.

In those states, insurers base premiums largely on a consumer's driving record, the number of miles driven per year and other factors.

Latest News

More News

National News

More National

Washington D.C.

More Washington DC

Your Local Election HQ

More Your Local Election HQ
graphic of the Red Cross

Latest News

More News


KFOR Podcasts

More Podcasts

Follow @KFOR on Twitter