is currently in the hands of the House Committee On Business and Labor.
How your credit score affects your car insurance
The bill was introduced as pressure grows to curb discriminatory insurance practices across the country. The use of a credit score to set rates is particularly under fire after the
(CFA) released a report revealing that the practice unfairly penalizes moderate- and low-income Americans.
Credit scores are usually used by banks and businesses to determine whether you can be trusted to pay off loans over time through financing agreements.
Since you purchase your insurance policy before insurers cover you, it might seem odd that your credit score plays a role in setting your rates.
But insurance providers decide what you pay for insurance based on perceived risk, and in 2007 the
If your credit score is low, you are statistically more likely to get into a car accident, and your insurance provider is more likely to lose money by covering you. To make up for that potential loss, the company will raise your premiums—the lower your score, the more you pay.
Your credit history affects your insurance premiums differently based on where you live. But the CFA report shows that in some states, your credit score alone could cause your rate to double.
The state of credit-based insurance in America
There are already limits on how your credit score can affect your insurance in Oregon. Insurance companies can’t deny your application or refuse to renew it based on your credit score. Similar laws also exist in Illinois, New York, and Utah.
These are only a few of the many states currently tackling credit-based insurance. According to
called the PAID Act in February. The bill would outlaw the use of credit scoring for setting insurance rates all over the U.S. It’s currently in the hands of the House Subcommittee on Consumer Protection and Commerce.
Navigating state insurance laws
MORE: The Top 5 Cheapest States for Car Insurance
Car Insurance laws change drastically from state to state. In Virginia and New Hampshire, you’re not even legally required to have auto insurance!
All this variety can make shopping for insurance complicated and scary. Fortunately,
makes it quick and easy. Based on your profile, Jerry compares policies and premiums from up to 45 different companies so you know you’re getting the best deal, no matter where you live.