Bad Credit is bad for your Insurance BillsPosted: Updated:
KENNEWICK, Wash. - As the economy continues to flounder, credit scores are plummeting. According to a leading producer of credit scores, FICO inc., more than 43 million people now have a credit score of 599 or below. In Washington, one out of four people have a low credit score, which usually ranges from 300-850. Insurance Commissioner Mike Kreidler warns consumers to be careful when using credit - it could increase your insurance costs.
Today, most insurance companies use your credit information and other factors to create what they call an "insurance credit score." The lower your score, the more you could pay for auto and homeowners insurance.
"We warned people last year, if the economy failed to rebound, we would see people's credit scores dive," said Kreidler. "Many people still out of work are struggling and relying more on their credit cards to pay bills. Unfortunately, those with the largest drops in their credit scores could pay as much as 8-15 percent more for insurance."
He says someone with a good driving record but bad credit can pay more for car insurance than somebody convicted of Driving Under the Influence.
Kreidler pushed legislation last year to ban the insurer's use of credit information. Many legislators, consumer advocates and those impacted by the practice of credit scoring supported Senate Bill 6252, but the legislation failed reach the senate floor.
Kreidler still supports banning credit scoring but believes short of a ban, consumers need to be educated on how simple credit choices they're making in today's economy - choices that sound reasonable to most - could cost them higher insurance rates.