Credit scoring and rating categories
Many insurance companies look at a consumer's credit history to decide whether to issue an auto, home or other policy of personal insurance or how much to charge. This practice is known as credit scoring or insurance scoring.
Insurance scoring has been controversial, and a number of states, including Oregon, limit its use.
Insurers in Oregon can't:
- Use a policyholder's credit information to raise premiums for an existing policy.
- Cancel or refuse to renew existing policies because of credit history problems.
- Use credit information as the only factor to decide whether to issue a policy.
Insurers in Oregon can:
- Use credit information when deciding whether to issue a new policy but only if it is part of an evaluation system that uses other factors and they can document that it helps them predict future claim costs and price their products. If credit history is used, insurance companies and agents must:
- Explain how the company uses credit information before running a credit check.
- Notify you before running a credit check.
- Explain any "adverse decision" - such as not offering a policy or the best rate.
Consumers can:
- Request a free copy of their credit report from the credit bureau.
- Work with the credit bureaus to correct any errors and have the insurer rerate their policy with accurate information.
- Request a rerating from their insurer once a year if credit history was considered at any time in the rating of their auto, home or other personal insurance policy. Premiums can't be raised as a result of the rerating and must be lowered if the consumer qualifies for a more favorable rate.
Credit information is available from three credit bureaus:
Equifax
www.equifax.com or 800-685-1111
Experian
www.experian.com or 888-397-3742
TransUnion
www.transunion.com or 800-888-4213
If there are mistakes, ask the credit bureau to correct the information.
Rating categories
If you are approved for coverage, the insurance company will place you in one of three basic categories of drivers: preferred, standard, or nonstandard.
Preferred: Drivers who are the best risks, which usually means the safest drivers. Preferred drivers have maintained clean driving records for the past three years and pay the lowest rates.
Standard: Drivers who are moderate risks. Rates for standard drivers are higher than those for preferred drivers. People in this category usually drive "family" cars and have reasonably clean driving records.
Nonstandard: Drivers who are high risk. They pay the highest rates for insurance. This category may include drivers under 25, drivers with little experience, drivers with histories of tickets or accidents, drivers with poor premium payment records, and drivers with convictions for driving recklessly or under the influence of alcohol or other drugs.
