The FACT Act of 2003: Notice and Request For Public Comment On the Effects of Credit Scores and Credit-Based Insurance Scores on the Availability and Affordability of Financial Products
Credit scoring for the purposes of financial products and insurance, though in theory is a great idea, the system currently used is extremely broken and unfair. It has been proven time and again that over 70% of people have errors on their credit report and until just recently it has been difficult to even get a copy of the reports that are negatively effecting their purchasing ability. Even now that people can access their reports more readily (for a hefty price for each pull), it is extremely difficult and time consuming to correct any inaccuracies contained in the reports. What is of the most concern is the length of time negative items can affect a person. Someone who experiences financial trouble when they are first starting out in life (between the ages of 18-22) will be close to 30 and in a much different spot in life by the time they are able to move past the negative items. Until then, they are domed to be "subprime". The mere fact that there are 3 major credit bureaus and that a person's score can vary by as much as 100 points between bureaus should be cause for concern. Another thing that is wrong with the system is that when you have no credit, you might as well have bad credit because you're treated the same. Instead of giving you the benefit of the doubt, the credit scoring agency gives those with no established credit similar scores as those that have filed bankruptcy, had several chargeoffs, and other negative things. This is completely unfair. As far as credit scoring for insurance purposes, I think it should be illegal. I, personally, have been denied or rated out of insurance due to my credit score. Even though I have never made a single insurance payment late or filed any major claims against my insurance, when I went shopping for a new insurance company, the cheapest rates I could find were almost double what I was paying due to my credit score. My credit score has nothing to do with the way I drive and should not be a factor in insurance decisioning.