Credit score

[civvver]

I opened my car insurance bill and was shocked it jumped 20% so I called the company to get an explanation. After waiting around a while the guy said it was because my wife's credit score dropped. Apparently they put you in different tiers based on your credit score. I get billed every 6 months so last time they sent us a bill my score came in at 739 and my wife's at 742 which was a level 7 out of 10 for me and 8/10 for her. I have no idea the cutoffs for these tiers but that's what it said on our bill.

Fast forward to now, my score went up a tiny bit to 740 but hers dropped to 720. Not really sure why as I don't have access to her report, but it's probably just some credit card balances because we opened some new cards and charged some stuff for zero interest. But apparently those 20 points knock her down to a level 7, and me still being at a level 7, the guy explained to me they use the highest score between the two of you so we were getting charged for a level 8 and now dropping that level makes my bill $200 more. He of course couldn't tell me what the cutoff is but I'm assuming it's right around 740 since she was an 8 before and I'm still a 7.

Again I can't believe I'm writing this cus it all sounds so absurd that like 5 points on a credit score could cost me $34 a month. That's some serious cash over the course of a year. And the best part is I don't even know how to access what score they use because they use something called a traveller's score, not my fico credit card score which is the free one all these cards give you now, nor my equifax/tu score which is the free one you can get online at like credit karma or various sites. So I don't even have a way to check it to see if it goes up to tell them to run my credit again.

It's all absurd. It should be outlawed, and indeed this pricing model is outlawed in CA and a few other states. I have a perfect driving record, no claims and have never missed any payments to my insurance company (I pay 6 months up front for a teeny tiny discount), or on any bill.

But I digress. Coming to my point, how the heck do you keep that score high? Cus now I have 3-4 months to get mine back to like 770 to get a better rate.

Alas I looked at my free credit report and my debt usage rate is good, like 15%, my payment history is spotless, and my asset mix is fine. The only negatives I could find are those little notes that my debt to income is too high and my credit length average is under 4 years. Cus I had opened some new interest free cards last year. I spent a lot of time looking online and apparent it's really hard to get your score from like 750 to 800. All you can really do is pay down more debt and wait for that average credit length to increase. Sucks for young people. So idk what to do except what I've been doing, just keep paying my bills on time. Got any other tips that won't hurt my credit long term (like opening a bunch of accounts or credit increases)?

So what's your experience or advice? I guess best advice I can think of besides obvious pay your bills on time and don't borrow too much is open 4 or 5 cards with no annual fee when you are young and keep them forever. Charge something every 4-6 months to ensure they stay open just buy a soda or something and pay it off right after.

Oh and then write your state legislature and complain about ridiculous pricing insurance companies get away with.

 

[Borachio]

I don't really understand why your credit rating would affect your car insurance.

Though I suppose if living in a dodgy area can affect it, why not your financial status as well?

But wait, you're paying $2000 a year to insure your car? That sounds really excessive to me. That's what a really young driver would have to pay here.

 

[Farm Boy]

Big data does weird ass things. Did you know paying for your gas inside the store instead of at the pump drops it a point or two(I can't substantiate this past "I heard it on NPR")? They assume you might be a smoker, and smokers trend lower on credit scores(because smokers trend lower on income), also pre-paying with cash is an indicator of lower income and lower income areas, so it just becomes a sort of free-market self-reinforcing class dynamic.

 

[Zelig]

Doesn't look like you're doing anything obviously wrong. Rather than trying to micro-game credit scores, where they could change the calculation at any time, I'd just shop for a new insurance provider. Longer-term, winning strategy is to drive up yuor income, and/or drive down your vehicle value so that you can afford not to bother with comprehensive or collision insurance.

Big data does weird ass things. Did you know paying for your gas inside the store instead of at the pump drops it a point or two(I can't substantiate this past "I heard it on NPR")? They assume you might be a smoker, and smokers trend lower on credit scores(because smokers trend lower on income), also pre-paying with cash is an indicator of lower income and lower income areas, so it just becomes a sort of free-market self-reinforcing class dynamic.

I hadn't realized the magnitude of the smoking thing in North America until I read this recently: https://www.washingtonpost.com/nati...3b42ba-4c8c-11e7-9669-250d0b15f83b_story.html

Big data with car insurance is kinda weird - they have a lot of data points, and a ton of variables that they could use, but practically they tend to be limited in how many they use because people aren't willing to spend hours filling out insurance applications (and regularly updating their data) to get a quote. Conversely, the variables they do use tend to skew towards to the data that's easiest for them to collect.

(I work with big data in the auto industry - not specifically insurance, but I've got some exposure to their methods.)

 

[Commodore]

I don't really understand why your credit rating would affect your car insurance.

Companies use credit score to assess your reliability when it comes to paying your bills. So a lower score means you are less reliable and a bigger risk not to pay your premiums (at least in their minds). And the higher risk you are the more they are going to charge you to make sure they get their money's worth out of insuring you.

 

[Gori the Grey]

Press harder with the insurance company. Sometimes when a human sees that the computer has done something that doesn't make any sense, that person can make an adjustment. Stress how good you've been about paying your bills over the years, etc. Threaten to go to a different insurer if it isn't changed.

 

[Hygro]

One day my credit score theme song gonna be "started from the bottom now we here"

 

[Synobun]

One day my credit score theme song gonna be "started from the bottom now we here"

I must admit this does keep me up at night sometimes. I started building credit the moment I could and before I moved across the continent I had a credit score of 810. Since then I've taken on moving and medical debt and have often gone a few months between payments on aforementioned debt. 3 years later and I'm at 675. It'll probably be a year or more until that situation changes.

I'm not looking forward to rebuilding my score from such a drastic drop.

 

[warpus]

When I was renewing my mortgage 4 years ago, my new interest rate was going to rely in part on my credit score. I miss payment dates sometimes, and am overall fairly lethargic about paying stuff on time, so I figured my credit score was fairly poor.

Imagine my surprise when it turns out it was really good. Apparently because I eventually pay stuff off, have good credit history, a stable job, and no funny business.. So I got a good interest rate. Totally wasn't expecting it, I went into that meeting really nervous, and came out of it high-fiving myself

That was 4 years ago and I've been better at paying bills on time. So in theory my credit score is pretty good, but to be honest I have no idea. The only times my insurance rates went up was when my house got flooded. I had to pay an increased fee for a while each time, but eventually my rates always went down again. My credit score doesn't really affect it, whether it's good or amazing.

That sucks that your car insurance rates are tied to a credit score. Is that a normal thing in the U.S.? Maybe you could find an insurance company that doesn't do that. Call a broker maybe and get some quotes, maybe you can find a better deal

 

[Commodore]

When I was renewing my mortgage 4 years ago, my new interest rate was going to rely in part on my credit score. I miss payment dates sometimes, and am overall fairly lethargic about paying stuff on time, so I figured my credit score was fairly poor.

Imagine my surprise when it turns out it was really good. Apparently because I eventually pay stuff off, have good credit history, a stable job, and no funny business.. So I got a good interest rate. Totally wasn't expecting it, I went into that meeting really nervous, and came out of it high-fiving myself

Late payments don't really start impacting your credit score until they are at least 60 days past due since that's when most companies will start reporting it to the credit bureaus. The real killer for credit scores though are defaulted debts. As long as there aren't any of those in your credit history, your score should stay pretty good.

Is that a normal thing in the U.S.?

As far as I know, it's normal now but is still a pretty recent thing. I think my insurance company started doing it about 8 years ago.

 

[Zelig]

Companies use credit score to assess your reliability when it comes to paying your bills. So a lower score means you are less reliable and a bigger risk not to pay your premiums (at least in their minds). And the higher risk you are the more they are going to charge you to make sure they get their money's worth out of insuring you.

That doesn't follow. Insurance companies charge based on the risk of claims, not on the risk of failed payments. It makes sense to charge more to people with low credit scores if non-payment involve some risk to the company (i.e. if someone has a fungible item that they're getting charged interest rates on - it's pretty inconvenient for companies when someone fails to pay them for something the company owns but the individual still has in their possession.). An insurance company has zero risk from non-payment, they can simply stop providing coverage.

 

[Cheetah]

This whole thing with credit scores seems so weird to me... In Norway they would just check my income before giving me a loan, or how many insurance products I buy for the insurance price.