Proposed Law Stops Auto Insurers Using Credit Scores To Set Rates

MoneyTips

Another Use for Your Credit Score

You probably know that your credit score affects the interest rates you'll pay for credit cards and loans. Did you know that your credit score could also affect your auto insurance rates?

It can in all but three states (California, Massachusetts, and Hawaii). Those three states have banned credit-based insurance scoring – the use of credit scores in determining auto insurance premiums. Rep. Rashida Tlaib (D-MI) would like to make that ban nationwide.

Rep. Tlaib is introducing a bill that would prohibit auto insurance companies from using a client's credit history to set rates for premiums. She claims that the practice discriminates against low-income Americans and compounds ethnic and racial discrimination.

We Use It Because It Works

Insurers use credit-based scoring for one basic reason – it accurately assesses risk. Separate studies from the University of Texas and the Federal Trade Commissio...

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