03 Oct NC Rep. Mel Watt Takes On Insurance Link To Credit Scores
What does bankruptcy have to do with how likely you are to get into a car accident? Insurance companies seem to think that one’s credit score is linked to the risk the insurance company takes on in insuring that person. This affects many lower income people, and represents millions of dollars in premiums paid to the insurance companies.
Everyone who files for bankruptcy gets a big hit on their credit rating, and they expect that credit cards and loan rates will be higher until they can get their credit scores up. Not all people who file for bankruptcy will present a continuing risk to lenders, but using bankruptcy as a factor for credit scores makes sense.
NC Representative Mel Watt is questioning the fairness of linking credit scores to the cost of home and car insurance. The insurance companies have used a lower credit score as justification for higher insurance rates, stating that people who don’t pay their bills on time are more likely to not take care of their homes/cars and that they make more claims. Representative Watt doesn’t think this makes sense and is holding hearings to look into the matter.
Watt examines role of credit in car insurance
Hearing to explore fairness of linking scores to premiums
Watt examines role of credit in car insurance Hearing to explore fairness of linking scores to premiums Being a lead foot has always put people at risk of increased car insurance premiums. But what about shopping too much?
Rep. Mel Watt is holding a hearing Tuesday to explore whether the widespread practice of tying car insurance rates to credit scores is fair.
The Charlotte Democrat is chairman of the oversight and investigations subcommittee of the House Financial Services Committee.
His panel will review a report issued by the Federal Trade Commission that suggested that the growing use of credit-based scores effectively predicts who files claims — but also disproportionately affects minorities.
“Instead of looking at your driving record, they look at your credit score to determine how much they are going to charge you for automobile insurance,” Watt said in a recent interview. “That would be kind of like saying I’m going to charge you a higher rate on a loan because you drive bad.”
Watt said he was concerned about the reliability of the FTC study because one of its commissioners dissented.
“We might have to mandate collection of information to determine if we should prohibit credit scoring,” he said.
Lisa Zagaroli: firstname.lastname@example.org; 202-383-0018.
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