Can Your Credit Score Predict How Good a Driver You Are?

If you are old enough, you can remember whenAccording to the Center For Economic Justice, a
bankers granted loans based on a paper file and aconsumer advocate group, the credit agencies started
face to face interview. If you got the loan, chances arepitching the idea that credit reports and FICO scores
you looked a lot like the banker. Same race, samecould predict more than credit worthiness, it could
gender. That was the downside of the good old days.predict how a person would behave. It was pitched as
Enter the FICO score which does not take intoa cheap background tool, an inexpensive underwriting
account gender, race, ethnicity, age, creed or disability.device and as an identity verification tool. The agencies
FICO predicts future financial behavior based on pastliterally created the market.
performance. Obviously this is a more objectiveBut is using a credit report or FICO score a realistic
evaluation of credit worthiness not to mention moreway to predict behavior? Typically, the lower your
equitable. So for what it is, a predictor of creditscore, the more it costs you for goods or services
worthiness, it is a great tool for those lending credit.and the greater it detracts from applications ranging
But does it predict what kind of driver you are? Can itfrom employment to insurance.
guarantee what kind of worker you are? What part ofTwo groups of insurance agents, United Farmers
the score predicts how healthy you will be or how longAgents and the Association of Professional Allstate
you will live?Agents think credit scores have nothing to do with
Apparently the answer to those questions is secretunderwriting insurance. Understandably, the agents lose
because the companies and organizations that usecommissions when the insurance is priced higher than
your FICO scores and credit reports to underwritesome can afford. Their argument is a person with
their business are not sharing their evaluation processidentical driving record, car and claims history of that of
for "competitive" reasons. Where did they get the ideaanother person should not pay a higher premium than
to use this information in the first place?simply based on a lower FICO score. "No wonder
Let's take a little look back in time. Remember whenthere are so many uninsured drivers" says one
there were more than just three credit reportingAllstate agent.
agencies? Actually they liked to be called bureausThe same arguments can be made for health and life
back then. Ever notice how they like to sound like aninsurance as well. In essence, those who can afford it
arm of the government? When the governmentleast end up paying the most.
stopped naming entities bureaus and changed toSo what can you do to prevent being charged for a
agencies, so did the credit reporting people. Well theylow score? The credit agencies have the answer.
are not part of the government; they are for profitThey will sell you monitoring services so you can keep
organizations that sell data you provide.track of your record and dispute any errors you may
With the quantum leap in information technology, thefind. That's right; you pay them so you can correct
cost of gathering and processing your data droppedyour data. Data, that was incorrectly entered by them
dramatically and the credit bureau businessin the first place.
consolidated into the big three. Competition becameIs it time for reform? Credit reports and scores have a
pretty fierce and the cost of a credit report dropped.legitimate purpose when it comes to lending, but
Facing reduced margins, credit agencies looked for awithout empirical proof, should it be allowed to be used
way to repurpose the information they gathered onas an underwriting tool.
individuals.