Bad Credit? Bad insurance rates!!

[jackfaire]

A few years ago in my area they tried to pass a law that would make it illegal for insurance companies to use credit scores to set rates. It was voted down because the voting public was convinced the law would be a bad one. This is how.

Step One: Play a commercial with a middle class soccer mom walking towards a computer. The mom is saying how she was reading the law. She sits down at the computer and says, "I have questions" At no point during the commercial does she actually say any details of the law just that it concerns her and should concern us.

Step Two: Play a second commercial where you point out that one of the five people signed onto the bill a lobbyist who had nothing to do with writing or pushing the bill merely one who said yeah I sign on as a supporter. Point out how you should hate this lobbyist how this lobbyist sucks. Again say nothing of the bill.

Step Three: Get as many media outlets as you can to misquote the study you use to justify your stance on making poor people pay more money than well off people. They will quote, "Bad credit makes for bad drivers"

Step Four: Have 7 of the ten arguments against the bill in the Voter's Pamphlet be written by people who are listed only by their names and not the fact they sell insurance.

The bill failed of course all while ignoring that the truth of the matter was a study showed that those with bad credit are more likely to use their insurance. What does this mean?

Quite simply if me a person with bad credit has my side view mirror ripped off my car I am more likely to use my insurance to pay to replace it than say a person with plenty of money for whom paying out of pocket to fix it would be cheaper than having their rates go up.

By this justification they are going to charge me more money because I might actually have the audacity to use the insurance that I am legally forced to have.

Don't get me wrong I understand legally requiring people to have insurance but the way the law is insurance companies can then charge me a massive amount of money while only giving back the bare minimum when I need to use it.

The theory behind insurance is that X amount of people put their money into pool Y. Y then helps by having a bigger pool of money to help out person who wouldn't otherwise have the money they need to fix the situation.

People are gambling that they will never need Y but at the same time hoping it will be there.

I understand charging me a fair rate based off of my accident history. I do not agree using unrelated factors to determine this.

[BlaqueKatt]

if it makes you feel any better I once was given a job application to be a cashier in a convenience store that contained a consent form to let them run my credit-I asked why they needed that and was told "people with a credit score under x have a greater temptation to steal." Um no, criminals have a greater temptation to steal, my credit is bad because I have medical bills I can't pay, why would I jeopardize the job I would be using to pay those bills by stealing?

back on topic-my husband's credit score is good, but he's been in 3 accidents, none of which were his fault-he just has really bad luck...

[jackfaire]

Only job I didn't have an issue running my credit was one where I was going to be a financial advisor

[blas87]

I agree with Katt 100%, and unfortunately, there's a lot of unfair judgement towards people with bad credit.

All it takes is one burp in your health or your car blowing up and you can be SOL pretty damn quick.

[Dreamstalker]

100% agreement here. I never really understood how credit scores are suddenly this be-all-end-all of a person's trustworthiness/ability/etc.

[tropicsgoddess]

if it makes you feel any better I once was given a job application to be a cashier in a convenience store that contained a consent form to let them run my credit-I asked why they needed that and was told "people with a credit score under x have a greater temptation to steal." Um no, criminals have a greater temptation to steal, my credit is bad because I have medical bills I can't pay, why would I jeopardize the job I would be using to pay those bills by stealing?

back on topic-my husband's credit score is good, but he's been in 3 accidents, none of which were his fault-he just has really bad luck...

I hate that crap where that they assume that bad credit score = high likelyhood of theft of some sort for jobs. Sure my credit isn't all that stellar granted with some incidents in my life among other things, but I will NOT steal. What pissed me off was that one job I applied for some time back ran not only a drug test (pee) but also a credit AND criminal background check. I passed 2/3 and had good qualifications (I failed my credit check, but passed everything else with flying colors and I have a clean criminal background too), but they still said no. Besides that I think it's unfair for insurance companies to hike up rates based on somebody's credit score as opposed to driving history since it's about insuring the CAR.

[Mytical]

Ok the job I currently have I had to have a drug test, credit check, and background check. My credit is.. horrible as I have rather large medical bills do to a accident that pretty much destroyed my back. So I passed all them but the credit check. I was lucky though, and was called in for a second interview where I was asked about the credit problem. Once I explained the situation, I got the job. Not everybody is that lucky however.

Which is where I see the problem. A bunch of numbers and statistics does not explain anything. Any number of factors can lead to 'bad credit'. Like for instance. My parents had excellent credit (my mother up in the 800's) until last year. They got a new central air unit (both air and furnace) installed. The company that installed it not only lied to them, but did very poor work. The furnace has worked maybe a couple of weeks total since installation. It didn't work at all for the first few months it was installed.

The company lied about how much it would cost a month also. It was supposed to be 3 months same as cash (ie no payments needed) and $176 a month. It turned out to be over 300 a month, with no 3 month grace period. No .. they didn't get a 'better' furnace or change a single thing once they were quoted a price.

Now we thought we were ok, because this company had a 100% money back guarantee for 2 years. We even gave them a chance to make it right. They come out 'fixed it' (for about a week)..then came out and 'fixed' it..(for about a week). Finally my parents said. "Ok we just want our money back. We are not paying for something that does not work."

The company filed bankruptcy, restarted under a new name..and my parents were stuck with the bad credit since it had been financed under a third party. I couldn't blame them. No way I would pay not only more then I was supposed to, but for a peice of junk that had only worked a small amount of time total.

[Boozy]

I've been misinformed, because I had been told that unpaid medical bills had minimal effect on one's credit score.

Basically, Equifax and other large credit agencies claim that they put far more weight on credit card debt, mortgages, and even student loans. So although unpaid medical bills will appear on your credit record, the effect they have on the actual score is negligible.

[Mytical]

Well my credit score is 526, and the only bad reports on my credit are the medical bills. So .. no clue there. Student loans are always paid on time (and sometimes ahead of time). Don't have a credit card except something called a health card. Paying on a house, but that is automatically taken out, so that is always on time. *shrugs*. Oh and have had a savings account for 7 years which started out with 10k .. which I am told should help report, but not sure on that. Because I try hard to pay my deep debt of medical bills, the 10k has dwindled to only about 2k.

The 10k was from a trailor I had paid off before the accident that ruined my back. I think, however, what hurt me with the medical bills is that a lot of it was put on something called a Health Card. Sort of like a credit card for medical expenses only.

[Tanasi]

I know of several people that engage in insurance fraud when they need money for other debts. So I can see using credit reports in such cases, otherwise I'm not so sure.
Credit reports could also be used to see if the insuree has a realistic chance of paying the premiums. If someone already has $3K in payments a month and makes just a little bit more than that do you really think the insurance premiums will be paid on time? My experience says probably not.

When it comes to employment the wife and I not only use credit reports, but we also use criminals background checks and drug tests. We've learned the hard way, in every case where an employee was a drug user, had significant debts they were having trouble paying, or criminal records for theft have either stole from us or caused other significant expenses. I won't hire them the temptation to steal is too great and I don't have the time to put into it and I really don't want to spend the money. Also a very very good friend caught an employee stealing not only money but firearms from his sporting goods store. The stress from this caused him to have a heart attack (my opinion) and he died. I'm not afraid to die but I'm in no hurry to speed up my demise so I'll leave sure folks behind.

[jackfaire]

Credit reports could also be used to see if the insuree has a realistic chance of paying the premiums. If someone already has $3K in payments a month and makes just a little bit more than that do you really think the insurance premiums will be paid on time? .

I could accept an argument like that. However that is not the Insurance companies public stance on it. Their party line is that, "Bad credit means your a bad driver" Hell if it was about the chances of people making payments there wouldn't be an argument.