How will I know if my credit score is affecting my insurance purchases if I don't know my score and it changes from company to company and day to day?
The Fair Credit Reporting Act (FCRA) says that an insurance company has to tell you if they have taken "adverse action" against you, in whole or in part, because of the information in your credit report. If your company tells you that you've been hurt, they must also tell you the name of the national credit bureau that gave them the information so you can get a free copy of your credit report. "Adverse action" is defined by the FCRA as "a denial or cancellation of, an increase in any charge for, a reduction or other unfavourable change in terms, coverage, or amount of any insurance that is already in place or that has been applied for in connection with the underwriting of insurance."
Some examples of "negative actions" are:
giving the customer a form with limited coverage
- Not giving the customer the best deal possible
- not giving a discount to the customer, or
- charging extra to the customer
Also, most state laws require insurers to give clear and specific reasons when they refuse to give out a policy, cancel it, or not renew it. Most state laws may not allow a reason like "bad credit score" as a valid reason. Different insurance companies have different ways and times for telling customers when something bad has happened. For example, the agent or the insurance company could let you know either verbally or in writing. This could happen at the beginning of the policy or each time it is renewed. Asking an insurance company is the best way to find out for sure if your credit score affects your ability to get the best policy at the best rate.
How can I get my credit score back up if I've been hurt?
First, you need to figure out what "factors" led to your credit score going down. The agent or company should be able to tell you the top "reason codes" (factors) that led to your score. To fully understand how to improve your credit score, you should also find out how much weight each of these factors has. Insurance companies and the people who make credit scoring models recommend the following ways to improve your credit score:
Don't try to "quick fix" your credit score in one day, or you could hurt it.
Instead, you should know that late payments, amounts owed, new credit applications, types of credit, collections, charge-offs, and bad things like bankruptcies, liens, and judgments are usually the most important things.
Make a plan that will help your credit score get better over time. On time, pay your bills (pay at least the minimum balance due, on time, every month). Keep the balances on your credit cards and other revolving debts like loans low.
Don't open too many new credit accounts.
Keep at it. If you make changes now and keep getting better, your snapshot will get better over time. If you take care of your credit well over time, your credit score may go up.
What can I do if I think that my credit report has wrong or inaccurate information that is hurting my credit score?
If your insurance company has taken "adverse action" against you because of your credit, you are entitled to a free copy of your credit report from the credit reporting bureau they used. But since the three national credit reporting bureaus do not share information with each other, it is a good idea to get a copy of your credit report from each of them. This is because each report may have the same or different mistakes, and fixing mistakes on one credit report may not fix mistakes on the others. You might have to pay a small fee (probably less than $10 per report), but this is not likely. Federal law says that you can get a free copy of your credit report if you have been turned down for credit or insurance, are on welfare, are unemployed, or have had your identity stolen.
If there are mistakes on your credit report, you should tell the credit bureau about them. Also, you should tell your insurance agent and company right away and ask if these mistakes will affect your purchase of insurance and if the company will wait to use your credit information until the wrong or inaccurate information is fixed.
Don't wait until the credit bureau figures it out. Small mistakes may have little or no effect on your credit score, but big ones could cause the insurance company to ignore the score and maybe even undo the bad thing they did.
The credit bureau will check the information by calling the reporting entity, which could be a bank, credit card company, collection agency, court clerk, etc. Within 30 days, the bureau must look into your case and give you a response.
If the disputed information can't be verified or if the reporting entity agrees that the information is wrong, the credit bureau must remove, complete, or update the information. Also, if you ask, the credit bureau must let any creditor who looked at your file in the last six months know about the change.
If the reporting entity confirms that the information is correct, the credit bureau will not take the information off your report or change it. But the FCRA lets you file a 100-word statement explaining your side of the story. Each time your credit report is sent out, the reporting bureau must include your statement. Make sure your insurance company has a copy of your statement and ask them if they will take it into account.
After the mistakes have been removed or fixed, it's a good idea to get a new copy of your credit report a few months later to make sure they haven't been reported again.
Most consumer groups recommend that you get a copy of your credit report from each of the three credit bureaus once a year to make sure there are no mistakes or to fix them before they become big problems. These are the three national credit bureaus:
Equifax
Experian
The Union
Where can I get help if I'm having trouble with my credit?
There are non-profit credit counselling organisations that may be able to help you if you can't solve your credit problems on your own or need more help. Also, churches, universities, military bases, credit unions, and housing authorities sometimes run counselling programmes that are not for profit. You can also check with a local bank or consumer protection office to see if they have a list of reliable, low-cost financial counselling services.
Some credit repair companies say that, for a fee, they can get correct information taken off your credit report. Be careful with these places because you can't get rid of accurate information from your credit record. You have the same access to credit reporting agencies as credit repair companies, and you can dispute items on your credit report for free.
Will I always feel bad about not having a perfect credit score?
The best way to find out if and when your company will re-evaluate you and put you on a different level or give you a new job is to ask. Some insurance companies check your credit history on a regular basis and put you in the right company or rating tier based on what they find. If you started out with a higher rate because of your credit, but your credit gets better over time, the next time the company checks your credit, they may give you a lower rate. Other insurance companies only check your credit when you apply for insurance for the first time. Even if you improve your credit history, the company won't care, and you'll stay in the higher-priced company or rating tier. On the other hand, if you are already in the company or rating tier with the best rates, you would not be downgraded if your credit history got worse.
Where can I find out more about this?
Ask your insurance company or agent if they have any information about how to use credit wisely.
Do a search on the Internet, but make sure the information you find is about how insurance companies use credit.
Talk to the Federal Trade Commission about the FCRA or their credit brochures for consumers.
