If I don't know my score and my score varies from company to company and from day to day, how will I know if my credit is affecting my insurance purchases?
The FCRA requires an insurance company to tell you if it has taken "adverse action" against you, in whole or in part, because of information in your credit report. If your company tells you you've been wronged, they should also tell you the name of the national credit bureau that provided the information so you can get a free copy of your credit report. The FCRA defines an "adverse action" to include "...a denial or cancellation, increase of any charge or reduction or other adverse or unfavorable change in the terms or coverage or amount of any existing or requested insurance , in connection with the underwriting of insurance…”
The following are examples of "adverse action":
- giving the consumer a limited coverage form
- not offering the consumer the best price
- not to grant a discount to the consumer, or
- give the consumer a supplement
In addition, most state laws require insurers to provide clear and specific reasons for any denial, cancellation or non-renewal of an insurance policy. A reason such as "bad credit" may not comply with most state laws. Insurance companies differ in how and when they notify consumers of an adverse action. For example, the notification may come verbally or in writing from the agent or the insurance company, and the notification may occur during the first period of insurance or at each renewal. The best way to know for sure if your credit score is affecting your acceptance with an insurer for the best policy at the best rate is to ask.
How can I improve my credit rating if I have been wronged?
First, you need to find out what "factors" caused your credit score to drop. The agent or company should be able to tell you the main "reason codes" (factors) that resulted in your score. Additionally, you need to know what weighted number each of these factors is assigned to fully understand how your credit score can be improved. Insurers and credit scoring model developers suggest the following ways to improve your credit:
Don't try to "quick fix" your credit overnight or you could end up hurting your score.
Instead, understand that the most important factors are usually: late payments, amounts owed, new credit applications, credit types, collections, charge-offs, and negative items such as bankruptcies, privileges and judgments.
Create a plan that will improve your credit over time. Pay your bills on time (pay at least the minimum balance due, on time, every month). Keep credit balances low, especially on revolving debt like credit cards.
Apply for new credit accounts sparingly.
Persevere. Your snapshot will improve over time if you make changes now and keep improving. If you demonstrate good credit behavior over time, your credit score may improve accordingly.
What can I do if I suspect that my credit report contains inaccurate or incorrect information that negatively affects my credit score?
If your insurance company has taken "adverse action" against you because of your credit, you are entitled to a free copy of your credit report from the credit bureau they used. However, since the three national credit bureaus do not share information with each other, it is advisable to obtain a copy of your credit report from each of them, as each report may contain identical errors. or different and correct errors on a credit. report may not correct errors with others. You may have to pay a nominal fee (probably less than $10 for each report). Under federal law, you have the right to a free copy of your credit report if you have been denied credit or insurance, are on welfare, are unemployed, or are a victim of of identity theft.
If you find errors in your credit report, notify the credit bureau. In addition, you should immediately notify your insurance agent and your company and ask if these errors will make a difference in your purchase of insurance and if the insurance company will postpone the use of your credit information until inaccurate or erroneous information is corrected.
Do not wait for the problem to be resolved by the credit bureau. Small errors may have little or no effect on your credit score, but large errors could cause the insurance company to disregard the score and possibly reverse the adverse action.
The credit bureau will contact the reporting entity (bank, credit card company, collection agency, clerk, etc.) to verify the information. The office must investigate and respond to you within 30 days.
If the disputed information cannot be verified, or if the reporting entity agrees that the information is incorrect, the credit bureau should remove, complete, or update the information. Also at your request, the credit bureau must send a correction notice to any creditor who has consulted your file within the last six months.
If the reporting entity verifies that the information is indeed correct, the credit bureau will not delete the information or correct the information on your credit file. However, the FCRA allows you to file a 100-word statement explaining your side of the story, and the reporting office must include your statement with your credit information each time it is sent. Make sure your insurance company has a copy of your statement and ask if it will be taken into account.
Once errors have been removed or corrected, it's a good idea to get a new copy of your credit report several months later to ensure that incorrect or erroneous information has not been reported again.
Most consumer groups suggest that you get a copy of your credit report from all three credit bureaus once a year to make sure there are no errors or to correct them before they occur. become big problems. The three national credit bureaus are:
Equifax
Experian
Trans-Union
Where can I go for help with credit issues?
If you can't solve your credit problems on your own or need additional help, there are nonprofit credit counseling organizations that might be able to help. Additionally, nonprofit counseling programs are sometimes run by churches, universities, military bases, credit unions, and housing authorities. You can also check with a local bank or consumer protection bureau to see if they have a list of reputable, low-cost financial advice services.
Some credit repair companies promise, for a fee, to have exact information removed from your credit report. Beware of these entities as accurate information cannot be removed from your credit file. You have the same access to credit reporting agencies as credit repair companies and you have the right to dispute items on the credit report free of charge.
Will a less than perfect credit rating haunt me forever?
The best way to find out if and when your company will reassess and reclassify or reassign you is to ask. Some insurance companies periodically review your credit and will place you in the appropriate company or rating level based on your current information. If you were initially charged a higher rate because of your credit and your credit improves over time, you may qualify for a lower rate the next time the company checks your credit. Other insurance companies look at your credit only when you first apply for insurance. Even if you improve your credit history, the company will not consider your improvement and you will continue in the most expensive company or rating level. Conversely, if you are already in the highest rated company or rating tier, you would not be downgraded if your credit history deteriorates.
Where can I get more information?
Ask your agent or insurance company if they have educational material on their use of credit.
Do a search on the Internet, but make sure the information you access deals specifically with the use of credit by insurance companies.
Contact the Federal Trade Commission for more information on the FCRA or their consumer credit brochures.
