Using Credit Scores to Set Auto Insurance Rates Hurts Michigan Consumers
Did You Know:
Insurance companies often charge higher auto insurance rates to people who have lower credit scores.
Today, 95 percent of auto insurers use credit evaluations to determine rates. The formulas they use to incorporate your credit score into an “insurance credit score” varies by insurer and isn’t shared. This gives consumers little ability to guess how the insurer arrives at the score.
Unfortunately, that no matter how good your driving record is, if you have a low credit score, you will end up paying higher rates. This disproportionately harms low income drivers – the very people who are most in need of insurance.
Is it legal for insurance companies to charge higher rates for low credit scores?
It is, and the decision to allow insurance companies to continue to use your credit information to determine rates was upheld by the Michigan Supreme Court in 2010.
Just How Much Does Your Credit Score Impact Rates?
Click below to see a sample of just how much insurance companies use credit scores to set their rates.
What can Michigan drivers do about it?
There are a few options. If you have experienced a catastrophic life event you can file for an “extraordinary life circumstances exception.” Here are the exceptions that Farm Bureau Insurance lists as “Reasonable Exceptions”:
- a catastrophic event, as declared by the federal or state government;
- serious illness or injury or serious illness or injury to an immediate family member;
- death of a spouse, child, or parent;
- divorce or involuntary interruption of legally owed alimony or support payments;
- identity theft;
- temporary loss of employment for a period of 3 months or more, if it results from involuntary termination;
- military deployment overseas; or
- predatory lending resulting in the foreclosure of, or commencement of proceedings or an action to foreclose, a mortgage of real property owned by the insured or insurance applicant.
To learn about other ways to save on your auto insurance policy, click here.
You can also write your lawmaker and tell them to stop unfair practices that target drivers with low credit scores.