Why can they use my credit to adversely affect my premium and policy, but they aren't reporting my 13 years of good payments to my report?
Why can insurance companies use credit-based decisions when determining premium, but don't report good payment history to credit bureaus?
byu/StopRuiningItForAll inInsurance
Posted by StopRuiningItForAll
7 Comments
Your credit score is based on your ability to pay back money, like with a credit card, a mortgage, or a car loan. Thats why these things report your payment history to credit bureaus, and they also use it to determine how much of a risk you are to paying them back. You’re purchasing a product with insurance, you’re not borrowing money from them.
Lots of companies use your credit score, or a form of a credit based score to measure you as a customer, you just don’t know it because it’s not a hard pull.
The reason is because they are not using it to extend credit. Lots of data strongly suggest that credit score and insurance risk are correlated, both in terms of claims and nonpayment of premiums. I don’t care for the practice, but it is legal in (I think) 46 states.
Who exactly told you they weren’t?
They use it to give you a rating factor that can both poitjvely and negatively impact your rate.
Progressive in WA had a swing if something like 250% in 2012 when they suspended use of credit.
It is nit about reporting payments against a credit line. Its figuring out if you get a rating factor of .6 or 1.75 for your attention to paying owed debts.
Credit can’t only adversely impact your rates, it can be a positive force as well. Insurance is not debt though, it’s a service contract, so they don’t report to credit.
Because we aren’t looking at credit scores, rather parts of it that predict your likelihood of having a claim. It’s a powerful piece of data, but it’s just data for sale like everything else. If any of the credit bureaus wanted payment data back I’d imagine every insurer would sell it, if they wanted it.
If you’re able to use a credit card for monthly payments, it kinda-sorta can help your credit score. On the flip side, insurance is based off the rule of large numbers and people with bad credit are more likely to file claims, not pay their insurance bill, etc