"Credit scoring works"

Waco Tribune
May 30, 2003

Credit scoring is a cost-effective way insurance companies lower the price of premiums and cover consumers who otherwise would be too expensive to underwrite.

Legislators and regulators should not be skeptical of the development of better and more efficient underwriting tools. Nor should they create barriers for their use. This is especially true of credit reports, which have been shown to be a cost-effective, accurate underwriting tool for insurance companies. Restricting credit history information as an underwriting tool would result in higher costs for insurers and higher premiums for consumers.

If consumers, legislators and regulators want to improve the affordability and availability of insurance, they should encourage the use of instruments that help insurers make more accurate underwriting decisions.

If the state takes over rate and underwriting control by banning the use of credit information, it will be like putting handcuffs on a mime.

Credit is how companies are able to predict future losses, allowing good risks to pay lower rates — and we want to handcuff them? Without credit checking all of us will end up paying higher and higher prices for insurance.

Some legislators said that the credit reporting bureaus’ information is often inaccurare. But we as consumers must work to make sure the information in our credit reports is accurate as the reports are used in many of our personal financial dealings.

Consumers should not fear — and legislators should not limit — use of credit scoring in setting insurance rates.

Peggy Venable,
Citizens for a Sound Economy
Austin, TX