Insurance credit scoring here to stay

I just received my FICO score and VantageScore ranking. My FICO score was 5 points less than my VantageScore ranking, yet FICO gave me a "good" rating and Vantage gave a "nonprime" grade D scoring. My vehicle insurance went up because of this score. Is there any way to dispute this?

-- Stephanie

Dear Stephanie,

Don't I wish you could dispute your insurer's decision! My insurer did the same thing to me while insisting I was still saving more money on my insurance than if the company didn't use scoring. Go figure.

What's really interesting about your situation is the big difference in how FICO and VantageScore rated your scores.

First, let me talk about my actuarial friends. Insurers have the right in most states to view your credit history and include what is found there in their calculations of your personal risk.

Why? Well, insurers say -- and our fearless state representatives agree -- there is a correlation between how a person handles credit and the likelihood of filing an insurance claim.

So to help everyone manage the difficult situation of who gets charged what rates, or gets coverage at all, insurers rely on a scientific model. All things considered, it is probably fairer than the old insurance underwriting technique of redlining based on neighborhood or race.

The bottom line of the situation is that insurance credit scoring is here to stay.

You can ask the insurer's customer service why your rates went up, but you'd probably have more luck asking my cat Stinky for answers. Each company has its own scoring models and considers them to be trade secrets.

However, you can get a version of your generic insurance score from TrueCredit. You will receive an auto and homeowner's coverage score along with advice for improving your score. Insurers may not look at the information contained in your credit reports and scores in the same way that a potential lender would. For example, an insurer may be more interested in your payment history than in how much you owe.

Your FICO and VantageScore credit scores are based on the information contained in your credit reports at each of the three major credit bureaus -- Experian, Equifax and TransUnion. Because each bureau has different data in its files about you, you will have a different score depending on which type of data they use.

Although you cannot dispute your scores, you can check your credit reports to assure that the information used to calculate those scores is correct. If you find inaccurate or out-of-date information, you should file a dispute with the bureau that reported it.

VantageScore is a relative newcomer to the credit-scoring industry. It was developed by the bureaus and they claim the VantageScore ranking is more up-to-date than a FICO score. Different math and weightings are used to figure your score and each has its own range of scores. FICO scores go from 350 to 850, while VantageScores range from 501 to 990 and also include a letter grade.

Once you have your credit reports in the best shape possible, your only other alternative for saving money on your insurance premiums is to shop around for different insurance carriers. Because insurers each use their own scoring systems, you could have a much better score with carrier A than you do with carrier B, and your premium will reflect that.

news source : http://www.scrippsnews.com/node/32303