FTC Researches Credit Score Impact on Insurance

03/29/2010

Increasing their deductibles is one way consumers can trim their insurance premiums.

Another approach may be to strengthen their credit score. Many insurers turn to this piece of information as a sign of consumers' financial stability, which could reflect in the number of claims they file for property damage, auto accidents or medical incidents.

For years, the Federal Trade Commission has been involved in efforts to increase consumers' understanding of these scores. Through the Fair and Accurate Credit Transactions Act of 2003, the commission defended their right to purchase scores and to request a free score from a mortgage lender while applying for a loan. Recent research has turned to credit scores' impact on insurance premiums.

"The FTC anticipates that upcoming reports it will issue on this subject will improve the transparency of information about credit scores in the insurance industry," the FTC said in a testimony to the the U.S. House Subcommittee on Financial Institutions and Consumer Credit of the Committee on Financial Services.

Credit scores, which range from 350 to 800, are also used in order to determine rates on auto loans and credit cards. Consumers can receive information about their scores through the FTC's, "Need Credit or Insurance? Your Credit Score Helps Determine What You’ll Pay" guide.

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