Credit scores affect car insurance rates?
Dear Driving for Dollars,
I understand that some car insurance companies use credit scores to set their rates. Why? And how do I find out if mine does?
It's a point of contention, but there is substantial evidence that indicates drivers who are on time with their payments to creditors are less likely to be involved in an accident, so insurers will often give those folks a better rate than someone who has made late payments -- even when that person has a car accident on his or her driving record.
All car insurance companies generally use this method of rating drivers as long as they are allowed to by the state. To find out if you are being evaluated this way, visit your state insurance commissioner's website to see if this is allowed in your state.
If it is allowed, it may not be in the future. The Ban the Use of Credit Scores in Auto Insurance Act was proposed in July 2012 by Reps. Hansen Clarke, John Conyers Jr. and Bennie Thompson. If passed, it would amend the Fair Credit Reporting Act so this is not allowed nationwide.
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