Mellody: Car insurance isn’t alone in the insurance world. You credit score is also used to determine your homeowners insurance premiums, as statistics show that there is a correlation between high credit and fewer insurance claims. And if you did not already know, employers will run a credit check as part of your background check when you apply for a job. While it is not usually a determining factor (depending on the field you work in), many employers will check your credit report.
Do you think there will be a push to reform the insurance industry’s system?
Mellody: I think there will be some movement on this front, especially since everyone is mandates to have car insurance with the exception of drivers in New Hampshire.
Obviously, judging people by their credit history and not their driving disproportionately impacts minorities, as we have lower credit scores on average than white Americans.
Consumer Reports ended their article on the piece calling for action, saying their investigation illuminated some of the worst practices by demonstrating the real cost to consumers in dollars and cents, and that they want join forces with consumers to demand that insurers—and the regulators charged with watching them on our behalf—adopt price-setting practices that are more linked to how you drive, and not to who they think you are.
Mellody is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS news and CBS.com.
Money Mondays: How Your Credit Score Affects Your Car Insurance Rates was originally published on blackamericaweb.com