Credit Score

Credit Scoring’s Use for Noncredit Decisions

As you know landlords or employers might check your credit and your credit score in evaluating your application; however, the most controversial noncredit use of scoring is in insurance. Insurers have discovered that there’s an enormously strong link between the quality of your credit and the likelihood you’ll file a claim. They can’t really explain it, but every large study of the issue has confirmed that this link exists. The worse your credit, the more likely you will cost an insurer money. The better your credit, the less likely you are to have an accident or otherwise suffer an insured loss.
As a result, more than 90 percent of homeowners and auto insurers use credit scoring to decide who to cover and what premiums to charge them. That outrages many consumers and consumer advocates who don’t see a logical connection between credit and insurance.