Credit scoring is coming
under angry fire in many states, including Minnesota. Many state
governments are not convinced that credit history accurately predicts
the likelihood that you'll file an insurance claim.
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Also, while it isn't against the law for insurance companies
in Minnesota to use credit histories to decide whether or not to insure
someone, it is illegal for them not to inform consumers that they will
be doing a credit check and using that information to make their
decision.
According to Minnesota Department of
Commerce Commissioner Jim Bernstein, "Since the insurance industry has
not allowed regulators to review their methods of determining insurance
scores, we are not convinced of their fairness. Everyone who does not
have a credit history should not be treated the same way. If so,
someone who always pays with cash would be put in the same group as
people who are bad credit risks."
Bernstein says he also has concerns
that the use of credit histories inherently discriminates against
certain groups such as the elderly and the poor.
"The burden is on the insurance
industry to demonstrate that credit scoring does not single out any one
class of people," he says.
A flurry of credit checks in a short
period of time will lower your credit score, something many consumers
aren't aware of. If you've applied for insurance at the same time
you've applied for a loan or a credit card, your credit history will
impact your insurance score.
The Minnesota Independent Insurance
Agents Association has supported legislation that allows the use of
credit histories to decide the risk of insuring a particular person,
but insists that insurance companies still inform consumers of the
practice.
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