FOX23 Investigation: Hidden costs of having bad credit?

By: Michelle Linn

Updated:

TULSA, Okla. - Quick Facts:

  • Insurance companies use your credit score/financial data to determine your rates
  • Oklahoma Insurance Commissioner John Doak mentions that it’s used on the Oklahoma Insurance Department website
  • Senator Rob Standridge is working to regulate the practice; other states have banned it
  • Consumer advocates say it could drive up Oklahoma’s already high rate of uninsured drivers
  • A good driver with bad credit could pay more for insurance than a bad driver with good credit

 

Having a poor credit score could cost drivers hundreds of dollars more a year for auto insurance.

“I think it's a well-kept secret by the insurance industry,” said Mark Medeja, with AAA Oklahoma.

“Do you think it’s fair?” FOX23’s Michelle Linn asked

“I see both sides of it, I think it's terribly unfair for the consumer, but I also see it from the insurance company perspective of this does have the correlation to determine rates,” he said.

 

 

Republican state senator Rob Standridge says Oklahoma insurance agents actually came to him more than a year ago with complaints about the practice. He hosted an interim study to better understand both how it works and how his constituents feel.

California, Hawaii and Massachusetts banned the process. FOX23 asked Standridge what he thinks could happen in Oklahoma.

“I don't know if we could do it in Oklahoma, it's fairly new, people aren't convinced that it's totally bad, so I don't think that there's a political opportunity to remove it altogether,” said Standridge.

FOX23 checked with Oklahoma Insurance Commissioner John Doak, and his website says insurance companies in Oklahoma use your credit score when determining your rates, but there is no explanation how much weight it holds.

“Believe me, they hold this like the secret sauce of a good barbecue place,” said Madeja.

“I'm not real happy with the process, but I want to do whatever we can do to try to let consumers know how it's affecting their rates,” said Standridge.

Consumer advocates say setting prices high for people with poor credit forces low income drivers to go without insurance, which just drivers up Oklahoma’s already high rate of uninsured drivers.

Senator Standridge is working on legislation that would take what he describes as "baby steps" toward making the process more transparent. The goal is to help people know how and when your financial data is used in pricing insurance, and to stop insurance companies from running reports frequently that can ding your credit, just like when you finance a car or house.

Senator Standridge, Commissioner Doak and even the insurance companies agree drivers should shop around. They said that if you call five different companies and get five very different quotes, the variable is likely a credit score.

Doak gave FOX23 this statement about the practice: “The use of credit in determining rates for home, auto and other personal lines has been a source of debate for a number of years in Oklahoma and across the country.

As recently as 2013, our counterparts at the Insurance Department in Arkansas provided an in-depth analysis related to the use and effectiveness of credit in determining consumer premiums.

Given the continued focus on credit across the country, it’s important we consider everyone’s opinion each and every year to ensure it’s being applied fairly and properly.”

 

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