Credit Scores and Insurance Rates – Strange Bedfellows
People sure do love their plastic. I’ve heard every excuse in the book for keeping a credit card.
It’s just one credit card. Come on, it won’t hurt nobody! I swear I just it just to pay my utilities and then I promptly pay it off every month. I use it because I get 3.65458476448% cash back; that’s like free money! If I don’t habitually honor the FICO gods by systematically using my credit card, I’ll ruin my credit rating! If my credit rating is bad it’ll cost me more to borrow other money, and besides, don’t you know that if your credit rating is bad your insurance rates go up?!
Soon, one of these excuses will likely be moot. The Chicago Tribune tells us that Michigan is in the process of banning the practice of using credit scores to determine insurance rates.
Finally, someone got a clue! Is it just me, or is it a stretch to assume that your FICO score—which measures your loyalty to the act of borrowing money—is an accurate barometer for determining how well you drive? I can hear the underwriter now, who I imagine sounds a little like Charlton Heston in Planet of the Apes …
Well, this Shan guy hasn’t has a ticket in seven years, pays his premium on-time, and hasn’t made a single claim since that hail storm in 2000 … but Oh, Sweet Dirty Apes, take a look at his credit score! Tsk tsk tsk. This character hasn’t borrowed money in the past 12 months, and in fact he’s closed a bunch of credit accounts in that time! For this, he … shall … PAAAYYYYY!
This court decision is a step in the right direction for those of us who refuse to worship at the altar of FICO. This case is going to the Michigan Supreme Court, so hopefully they’ll back up the appeals court.
Does anyone know of any other states where it’s illegal for insurance companies to use credit ratings to determine insurance rates?
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Shan is the author and founder of The Apostle of the Turtle.
I’m betting the insurance companies will prevail in the Michigan Supreme Court, which has a Republican majority and a poor track record on issues like this.
[...] Shan at The Apostle of the Turtle wonders, [...]
Depending on your state, you might have some resources on this topic:
For example, http://www.insurance.mo.gov/consumer/auto/autoCredit.htm
FYI
[...] brings us to about a week ago when, yet again, my insurance provider sent me a letter taunting me that I do not qualify for their cheapest rates. [...]