In the early 2000s, the personal insurance industry experimented with correlating a driver’s credit to the cost of managing their policy and a factor that would predict loss. The companies ordered credit reports as if you were applying for a loan at a bank or a credit card. After a few years, they had enough data to prove the correlation between bad credit, high accident activity, and poor payment behavior. They started charging more for drivers with awful credit and lowering premiums for those with excellent credit.
Consumer advocates tried putting it to a vote, letting the people decide whether insurance companies should be allowed to use credit in that manner. Companies poured millions into protecting their credit report gathering scheme, arguing commercial insurance, especially bonding companies, had been using it for years. We, the people, voted to allow them to continue using credit.
Maybe you have heard that in states adjacent to Oregon, attempts have been made recently to do away with credit for personal insurance but failed by a judge’s order. It’s a hot topic. Some believe certain underprivileged groups are being unfairly charged more because they are likely to have bad credit and therefore pay more for insurance.
For now, in Oregon, all insurers use credit to determine the cost of auto, home, renters, motor home, motorcycle, and boat insurance. The credit bureaus have even developed an insurance credit profile for each of us. Not only do they account for late payments on credit cards, consumer loans, cell phone and cable bills, medical debts, and house payments, they also include your timely payment on your insurance policies, including lapses, cancelations, and constant changes of companies.
I encourage everyone to frequently order a copy of your credit report to see what accounts are in error or those which are affecting your credit the most. There are ways of improving your credit by working with those creditors and settling with them, sometimes for a lot less than you owe.
I helped Maria, from Hillsboro, Oregon, by identifying what she could do to improve the score on her credit report. The biggest issue she had was an unpaid cellphone bill from three years prior. She had shared a plan with three roommates. No one paid their part, and she was left with a $1,400 debt. She called the cell company and negotiated a settlement of $700. Maria did the same thing with three other medical bills. Within six months, her credit score improved from 460 to 650. Her insurance premium went down from $1,000 for six months to less than $400. I’ve seen this happen many times now. I can honestly say that credit is the single most influential factor affecting the cost of your insurance.