Start Comparing Rates within Minutes!
Start Comparing Rates within Minutes and you could save!
Compare Rates Within Minutes!
- Complete 1 short quote form
- Compare rates from top insurers
- Save time & money!
Insurance rates may shift as CFPB announces plans to regulate credit scoresPosted On Tue, July 24, 2012
In a move which may eventually affect the credit scores and insurance rates of many consumers nationwide, the Consumer Financial Protection Bureau announced this week that it plans to supervise credit reporting agencies.
Credit reporting agencies track consumers' payment and debt history to measure their level of risk for new loans or credit products, which is commonly represented by a three-digit score, such as a FICO score. This is the first measure of oversight on the industry at a federal level.
"Credit reporting is at the heart of our lending systems and enables many of us to get credit, afford a home, or get an education," said CFPB Director Richard Cordray. "Supervising this market will help ensure that it works properly for consumers, lenders, and the wider economy. There is much at stake in making sure it is both fair and effective."
The CFPB's supervision will affect 30 of the largest companies in the industry, which have data on a combined 200 million Americans. The rules will officially take effect at the end of September.
While credit reports may be more commonly linked to discussion regarding the mortgage or credit card industries, they are also relevant in the context of insurance quotes, since many companies use credit scores in their rate systems. They say that a high credit score may mean consumers are more responsible in general and may be better at paying their bills.
While the practice has been eliminated in some states, and each insurer evaluates scores differently, it can still be a factor. Credit scores could be a negative rate influence for some consumers, but they could also help others.
Data from the Property Casualty Insurers Association of America found that the use of credit scores led 75 percent of insurers to increase the number of applicants they accepted.
Feedback or questions? Email the editor here.