Hmmm. Why shouldn’t it be if there is reasonable actuarial data that shows a correlation between auto accidents and credit scores?
I wouldn’t be surprised if bad credit and auto accidents were both associated with risky behavior.
Is having a job? Credit scores are tied to employment too. One of the reasons being out of work for extended periods leads to staying unemployed.
That’s a good point. I don’t know where I fall on this.
I am somewhat inclined to think credit score might be a rational/fair consideration in pricing auto insurance but averse to saying it should be an allowable consideration in employment. And I don’t know why.
I don’t agree with it for auto insurance. Any accident causes your insurance rates to increase which now causes your credit score to drop. Even accidents not caused by you. Because the fact you were in an accident at all makes you more risky than someone who hasn’t been. (See the logic?) Makes for a good excuse to charge more though. And that’s really what it all boils down to in the end. Making more money.
Interesting. I figured the process flow was one-way, credit score as a factor in underwriting the policy. I didn’t think it worked both directions such that an auto accident would affect credit score.
I don’t think it should behave that way.
Granted it doesn’t drop as much as someone causing the accident, but it still drops. It’s not dropping because of the accident. It’s dropping as a result of being charged higher premiums. (Higher premiums = bigger risk) That’s why the bureaus insist that getting in an accident doesn’t impact your score. Because it really doesn’t. It’s the higher premiums that do.
-Experian
Just because we legalized loansharking doesn’t mean we have to continue the practice.
There are drugs that have been made illegal because the damage they do is too great.
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A few years ago Costco started accepting Visa. Now my points really rack up.
What rubbish. If someone goes into bankruptcy then somehow they are more likely to get into an accident?
The only reason insurance companies look at a credit score is a way to rake in more money.
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Kroger still accepts visa credit cards in the majority of its stores across the US. It has only stopped accepting visa in two of its smaller divisions.
Its obviously a trial run to see how it impacts business before deciding if it needs to extend it across the majority of its business.
Credit scores are not solely a function of bankruptcy or events outside a person’s control.
They are often the result of choices, choices that can reflect a tendency toward risky behavior.
I don’t know that it is the case, but I would not be surprised if there were a relationship in the data showing increased likelihood of insurance claim with lower credit scores.
Algorithms rule our life now.
The problem is that algorithms are written by humans and there is no public oversight because that is seen as proprietary.
In a lot of cases, a positive feed back loop can happen because of decisions made by math and not human beings.
Here is a a pretty good book on the subject.
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My credit score sucked a few years ago ans was absolutely nothing to do with me undertaking risky behavioir.
What I do not care for is this assumption (by society) that a credit score is somehow representative of a persons value or their sense of responsibility. This then leads us to a state where credit scores are determined to assess a persons honesty etc.
This isn’t some mafia fantasy.
This is a good point on the feedback loop. Thanks for the recommendation. i plan on checking it out.
This goes to the heart of how the insurance industry works. Almost none of the factors they consider are absolute predictors of anything. It’s all about assessing overall risk. My age is not an absolute predictor that I’ll engage (or not) on risky behavior, but across the swath of averages, it’s certainly the way to bet. It’s like the quantum mechanics of wagering. There is very high uncertainty with respect to an individual outcome, but large scale outcome can understood with at least a modicum of precision.
I’m trying not to make a value judgement on whether use credit score or any other measure that has meaning is the right thing to do. Merely that insurance is priced and offered on this very premise.
When I get homeowners insurance, i have some control when i buy the house of where the nearest fire station is, which will affect the rate I pay. But I have little control of that subsequently. The local jurisdiction could retire the fire house or build one next door to me. Not my fault. But it still affects what I pay.
Credit score is a nasty one. It comes replete with all sorts of potential feedbacks and pitfalls.
And it’s not just assessing the potential for risky behavior, it’s assessing the potential for a claim. Which are closely, but not directly correlated.
My credit score dropped significantly simply through finishing off payment on loans. It’s odd that demonstrating financial responsibility through the repayment of loans would hurt your credit.
Mine dropped slightly when I finished my mortgage payments.
Allan
That’s because it’s not a credit score. It’s a debt score.
I might be in favor of this.
