Should Credit Scores Affect Your Auto Insurance Rates?
Article Submitted By: ktexas
Most auto insurers take credit scores into account in determining rates. This is impacting consumers especially hard in these tough economic times, and many states are taking steps to help.
Most auto insurers take credit scores into account in determining rates. This is impacting consumers especially hard in these tough economic times, and many states are taking steps to help.
As credit card companies lower credit limits and consumer debt increases amid a global recession, credit scores for many consumers are being downgraded. Not only do these consumers have to worry about loans and interest rates, but they have to worry about higher car insurance premiums.
Officials in several states are pushing to change this. In Connecticut a bill would force insurers to be transparent about how credit scores are being used during their review of applicants. In the Florida legislature bills have been introduced that would prohibit insurers from using credit scores to determine rates. In Michigan there has been a ban against using credit scores to set auto insurance rates since 2005, but the ban is being challenged in the state Supreme Court. The Michigan State insurance commissioner is getting around the legal question by denying seven insurance companies from enacting rate increases.
Insurance industry claims that studies have shown that there is an undeniable correlation between credit scores and insurance risk. Consumer advocates claim people's credit scores have no connection to their driving records and shouldn't be used to deny coverages or raise premiums.
Raising insurance premiums of responsible drivers who are having financial problems does seem like kicking a person when he's down.
