Ban on Unfair Credit Score Practices Sought

A credit score is basically a mathematical formula based on numerous information found in a credit card report. This is then compared to millions of other people. The result is a fairly accurate prediction of how likely one is going to pay for his/her bills. Although it may sound unimportant, credit scores are being used as a basis for approval of loans, mortgages, insurance and other transactions. The higher the credit score, the more likely that you would get lower interest rates.

With this on hand, Insurance Commissioner Mike Kreidler is pushing for a complete ban on what he calls “the insurance industry’s controversial practice of credit scoring.”

Reacting to a scheduled hearing on House Bill 2513, Kreidler said that for the last several years, thousand of consumers have had complaints received by his office regarding the said scoring. He stated that even if people religiously pay bills on time, or has never filed a claim or has gotten a ticket, premium rates are still going up based on their credit history.

Credit card transactions affect said scoring. The State of Washington’s top insurance regulator stated that those who are likely to have lower credit scores are card holders who have consolidated their credit cards. Those who cancelled the same or have lowered their credit card limits are also being affected. As such, card usage is now an issue in enrolling for insurance and other credit transactions.

Even people who have enrolled in credit cards to get frequent flier miles eight years ago have rated low scores. This is also true to those who do not have enough active credit cards or bank accounts.

Kreidler noted that although there is no connection between how people drive their cars or treat their homes in applying for an insurance coverage, such instances affect the kind of insurance rates they would likely get. He belied threats issued by insurance companies and referred to them as “scare tactics.” True enough, some industry insiders say that banning credit scoring would eventually lead to a significant increase in insurance rates.

Other reasons for interest rates hike include purchasing items at a 10% discount by using store cards and opting to buy a larger ticket item for a year’s deferred interest.

Representative Sharon Nelson, of the 34th District sponsored House Bill 2513. In the Senate, SB 6552 is being sponsored by Senator Jeanne Kohl-Welles.

Kreidler stated that with the practice being blatantly unfair and discriminatory, it was almost 10 years ago that he campaigned for a ban on such practices. While the insurance industry contends that such scoring is a form of reward for being responsible, he contests that even “people making responsible decisions are being harmed by the practice.”