| You hit another car; your auto insurer
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| | statistical correlation between good
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| probably raises your premiums. But you
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| | credit and relatively low insurance
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| may not know that your premiums can shoot
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| | losses presupposes that the
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| up much higher if your car insurance
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| | responsibility required to prudently
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| company is using a new breed of credit
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| | manage one's finances is associated with
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| score, even if you have a pristine
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| | other types of responsible and prudent
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| driving record.
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| | behaviors, such as proper maintenance of
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| Known as credit-based insurance scores,
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| | homes and autos, and safe operation of
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| these numbers are computed from your
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| | cars.
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| bill-paying and loan data collected by
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| | Many recent studies confirm the strong
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| the major credit bureaus. In recent
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| | correlation between credit history and
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| years, the scores have become as
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| | loss in both auto and homeowners
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| important in determining your annual
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| | insurance. Neither insurers nor the
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| premium as your driving record and the
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| | credit-scoring companies that discovered
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| neighborhood where you live.
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| | the relationship know what causes it. It
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| Hundreds of insurers are using models
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| | is believed that generally people with a
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| created by ChoicePoint and Fair Isaac,
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| | pattern of irresponsible financial
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| the Minneapolis company that invented
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| | behavior and poor credit history have a
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| credit scoring. Others have developed
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| | much greater chance of being in an
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| their own systems. The scoring models
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| | accident or filing a claim. But the other
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| stress bits of credit data that would
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| | studies, such as the Monaghan study,
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| seem to have little to do with a driver's
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| | which reviewed those long-standing
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| tendency to make claims. There are no
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| | inferences, say that links between
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| standards: Each company uses different
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| | responsible financial management and
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| models and weighs different credit-report
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| | future expected losses are "unsupported."
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| information. Some big companies find
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| | Either way scoring could cost you
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| scoring useful only for new customers,
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| | hundreds of extra dollars. Even a driver
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| not renewals, while others may use it for
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| | with a fantastic credit score, who rates
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| both.
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| | a low-interest mortgage, could wind up
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| Auto insurers use this credit information
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| | with a less favorable insurance score and
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| to produce an "insurance score" because
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| | thus a high premium. That's because
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| they believe it allows them to more
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| | formulations for insurance scores weigh
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| accurately assess and price a risk. In
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| | credit data differently from traditional
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| conjunction with other information such
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| | lender scores.
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| as years of driving experience, previous
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| | There is a way to check. Under the Fair
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| accidents, the type of car or home, and
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| | Credit Reporting Act of 1970, insurers
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| where the driver lives and drives,
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| | are required to notify consumers if they
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| credit-based insurance scores allow
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| | experience adverse action, such as
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| insurers to differentiate between lower
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| | denial, premium increase or cancellation
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| and higher insurance risks.
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| | of coverage, due to information contained
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| These scores are not a measure of
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| | in their credit report. Consumers also
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| someone's financial assets, but of how
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| | have the right to have errors in their
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| you as an individual manage your
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| | credit report corrected and can request
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| financial affairs. Insurance scores are
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| | that the insurance company recalculate
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| supposed to be highly accurate predictors
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| | their insurance score and reevaluate
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| of future loss in auto insurance. The
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| | their insurance coverage and premium.
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