I receive letters on occasion from my insurance companies stating they will be checking my credit score (I have no idea how a third party credit score should affect my insurance rate). Anyone know where a credit score needs to be in order not to be penalized? And Why?

Credit score does effect Auto insurance rates and many other things. People with lower credit scores have a higher default rate on their auto payments and the cars are all banged up when the bank repo's them, or they seem to have a higher loss rate as well......

It's a reflection of a person's responsibility.

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It's a reflection of a person's responsibility.

It's a third party's opinion based on what they've been told by others.

If you want a reflection of a person's responsibility, then ask for references.

Somebody deep in debt might not be able to resist the temptation to commit fraud for some quick $$$, or to get rid of the car he or she couldn't afford in the first place, needs major repairs before it is paid for (not uncommon with older used cars), etc.

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Originally posted by a1abdj:

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It's a reflection of a person's responsibility.

It's a third party's opinion based on what they've been told by others.

If you want a reflection of a person's responsibility, then ask for references.

I can understand what you both say, but in my case the insurance companies I've been with for over 6 years now have the most accurate record which is my payment history to them. I have always paid the entire premium within days of getting them, motorcycle for 12 months, vehicles and home for 6 months.
I remember in the last letter I received saying "your credit score may be adversely affected by lack of credit information". Crazy.

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I remember in the last letter I received saying "your credit score may be adversely affected by lack of credit information". Crazy.

Is this because you pay cash for things and seldom or never use credit? You know, being responsible? Crazy is putting it mildly.

I’ve never had a credit check for insurance. No inquiries show up for this on my score.

I have one credit card which I use for most purchases and I don't wait for the monthly statement but pay it off every couple weeks. I decided I should have one other card after my MasterCard was "compromised" and had to wait a day for a new card. Being without it a wasn't a problem but if it occurs again while I'm traveling it could, so I now have two cards. I've used the new card twice to make sure it works and paid it off within a few days, I'll just use it occasionally to keep it active. That's it.
In talking with my daughter on this subject when she called just a few minutes ago (she is in banking) she said "you know your credit score will drop now that you picked up a second credit card, right?" I thought good Lord, but then she added "after you generate a history with it your score will go back up again".

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Originally posted by frayedends:
I’ve never had a credit check for insurance. No inquiries show up for this on my score.

I wish I would have saved the letters they have sent me over the last couple years. They say something to the effect "we check our clients credit scores on some regular basis and this letter is to inform you that we recently checked yours, if you wish to receive a copy of it please call, write, us" And "credit score can affect premiums and various things affect credit scores".

Daughter suggested I can check my score on my BOA app, so let's see........

Uh oh "Too few accounts currently paid as agreed. FICO Scores consider the number of accounts that are paid as agreed. Your score was impacted because the number of these accounts is too low, or because you've missed payments recently on some of your accounts."

And "Lack of recent installment loan information".

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Originally posted by AZ Husker:
It's a reflection of a person's responsibility.

Bullsh¡t! Credit scores do not.

I have a short story. I paid for my last two cars cash, I bought my house for cash. I didn't even have a credit card for the last 15 years. I had 6 and them ran them all up, but not maxed out. I said oh, this is not going to be good. So I paid them all up, not one account was ever delinquent, and after I paid them off I cancelled them.

After I cancelled them is when I saved the money to buy my house, paid cash. Also in the last 15 years bought two cars.

Skip a head until three years ago. I was needing a new car, the one I was driving with a money pit I was working on it up to two days a week, and up $200.00 a month.

Yet I wasn't able to save up the money to pay cash as I did the last two cars, so I thought I'll just get a loan. I'm good for it, right? After all, I have a fairly good job with a fairly good income that is stable. I own a home, should be a snap!

WRONG! Denied, denied, denied. My credit score was to low. No credit history, that was recent. So, I struggled to find someone who would even give me a credit card.

I did, and worked very diligently to get credit, because I needed a new car. After two years I was able to get a loan for the car. All a long my old car was nickle and diming me to death. Before I got my new car, I was spending up to $350.00 a month keeping it running. A 20 year old car with 300,000 miles on it.

Since it was so unreliable I was a virtual prisoner in my house because I was afraid that it would break down. It was getting towed at least twice a month.

So no. It's not a reflection on a person's responsibility.


Oh, don't ever get rid of your credit card, because like me, one day you might really need a loan and, end up denied, or paying very high interest.

All because you are reasonable and not living outside your means. Paying for everything with cash. Always keep a line of credit open, because one day you will need credit and not have it!



ARman

Measuring responsibility by metrics is absurd. Fiscal responsiblity is complicated and involves much more than a score.

Here's another reason I know it's BS. My credit score isn't horribly far from as high as it can get, yet my insurance rates area always increasing. One would think, that if what they are saying is true, what they are charging me would remain the same or decrease.

Credit scoring is just another thing that turned into something it was never supposed to be. If I were in charge of such things, access to credit scores would be strictly limited to those making credit decisions. Insurance companies aren't the only ones pulling this crap.

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Originally posted by ridewv:
I receive letters on occasion from my insurance companies stating they will be checking my credit score (I have no idea how a third party credit score should affect my insurance rate). Anyone know where a credit score needs to be in order not to be penalized? And Why?

Oh, yeah. There is also a insurance credit score. It's based off of your payment history with insurance companies, claims, driving records and others.

Here is the rub. Let's say you have a FICO rating of 790, which is pretty good. But you have jumped around to different insurance companies trying to get a better rate, and you might have had a small claim. So your insurance credit score is a 520. You will pay a higher rate, even though you have always paid on time.

But wait, it gets better. Let's say you have a OK or bad FICO score, but you are 50 years old, and have had the same insurance company from the time you started to drive at 16. Always paid on time and never a claim. So your insurance credit score is like a 800. What score do you think that the insurance company is going to base your insurance rates on?

If you said the lower score, you are correct. Pat yourself on the head and get a cookie. They will base their rates on whatever they can to get the highest price.


ARman

The only reason I can think of for insurance companies to look at one's credit score is if the client is going to be making monthly payments. For instance someone who chronicly misses car insurance payments is going to be a real pain for the insurance company, they'll have to cancel the policy, inform the state, then when payment finally does arrive reissue and notify the state it's back in force...

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Originally posted by a1abdj:

It's a third party's opinion based on what they've been told by others.

Which is more than enough of an excuse to charge you more.
Any reason is a good reason to them.

People with higher credit are typically more well off and less likely to file a claim for damages that are slightly over their deductible.

People with low credit who likely need every dollar that can get are more likely to file a claim.

Example:

You sideswipe a pole and do $1500 in damages. You have a $500 deductible.

The higher your credit score, the less likely you are to turn in a claim for that.

I recently switched auto insurance. My credit rating is in the middle 700s. I also had an "insurance score" which was close to my credit rating.
Using a credit score (which may be quite inaccurate) should be illegal.

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Originally posted by frayedends:
I’ve never had a credit check for insurance. No inquiries show up for this on my score.

Oh yes you have, you just don't see it! Think of a soft check.