Consumer Credit Information Related to Insurance Companies
A growing number of personal auto and homeowners insurance companies have begun looking at
consumer credit information to decide whether to issue or renew policies, or to decide what premiums
to charge for those policies. This brochure is designed to help you understand, in general terms, how
your credit information is being used for personal auto and homeowners insurance, and how it may
affect your insurance purchases.
Is it legal for an insurance company to look at my credit information without my permission?
Yes. A federal law, the Fair Credit Reporting Act (FCRA), states that insurance companies have a
"permissible purpose" to look at your credit information without your permission. Insurance companies
must also comply with state insurance laws when using credit information in the underwriting and rating
Why are some insurance companies using credit information?
Some insurance companies believe there is a direct statistical relationship between financial stability
and losses. They believe that as a group, consumers who show more financial responsibility have fewer
and less costly losses, and therefore, should pay less for their insurance. Conversely, they believe that as
a group, consumers who show less financial responsibility have more and costlier losses, and therefore,
should pay more for their insurance.
Does using credit information discriminate against lower-income consumers?
Insurers that use credit and entities that have developed credit scoring models state that there is no
difference in credit scores among different income levels because there are just as many financially
responsible low-income consumers as there are financially responsible high-income consumers. In
addition, those companies warrant that factors such as income, gender, marital status, religion,
nationality, age, and location of property are not used in their credit scoring models. At the same time,
these entities have not addressed factors