This past week the U.S. Supreme Court heard oral argument on an interesting Fair Credit Reporting Act issue. In the case of Geico vs. Edo, the Supreme Court will be deciding whether insurance companies can be liable for punitive damages if they fail to notify customers that the customer’s credit score has led to higher rates.
Regardless of what the Supreme Court does, I think that the bigger issue for consumers relates to how insurance companies use your credit history in setting the price that a consumer pays for auto or homeowner’s insurance.
According to the AJC, drivers with the worst credit histories will pay almost double the price paid by a driver with very good credit. However, Georgia law permits the insurance companies to keep secret the formulas they use to decide what credit factors impact insurance premiums.
All of this begs the question of what relevance bad credit has on a driver’s likelihood to be involved in an accident.
If you thought that a bad credit score only affected your ability to finance a house or a car, think again. Even if you are not using credit, your cost of insurance will be affected by a bad credit history.
This credit score/insurance cost link serves as yet another reason for you to check your credit reports at least once a year. Since most credit reports have some errors, there is a good chance that you can improve your score simply by challenging these errors and demanding that the credit reporting agency remove the mistakes from your report.