The Insurance Locator

There is something strange in the neighborhood. Who ya gonna call? Credit Busters! The reality is that banks and credit card companies have suddenly been to increasing interest rates and reduced credit limits on existing credit facilities. According to statistics, almost half of U.S. banks reduced the limits of credit cards in the last quarter of 2008. The result is easy to see. If you are a borrower better or worse, your credit score is decreasing. Why is this happening? One of the most important factors in determining the outcome is the ratio between the amount you borrow and the amount available for loans. If the credit amount is reduced, is closer to its limit. This makes you look like a bad risk and the score falls. This would be true if they recklessly increasing its indebtedness, always near the maximum allowed. But there is something seriously wrong with the formula for calculating the score the client has done nothing wrong. It hurt good customers rather than the bad, because there are serious collateral damage. If credit scores are used only banks for internal purposes, customers could weather the storm. However, employers, landlords and, most importantly, insurance companies also use results to decide who is a responsible and reliable member of the community. According to the Society for Human Resource Management, half of employers nationwide routinely in the recruitment of credit scores. Most insurance companies use the scores to set premiums for the movement down the road. For some reason, these companies have never been able to explain, believe that people with poor credit ratings can not drive safely on the roads. This is strange. If people can not afford to replace their cars probably drive more carefully to reduce the risk of an accident. California, Massachusetts and Hawaii already have laws that prohibit the use of credit scores for car insurance purposes. A number of other states are proposing legislation to limit or ban the practice. As an aside, Maryland has a ban in place for home insurance purposes. Besides its lack of equity in general, use of credit scores is also potentially discriminatory. The problem is that people have low incomes tend to have low scores. This is concentrated among the poor performance of some minority groups. Civil rights advocates suggest that African American Latino and drivers with low credit ratings face unlawful discrimination based on race or ethnicity. Naturally, the automobile insurance companies deny this, but, citing commercial confidentiality, to refuse to submit detailed data to allow the matter is resolved one way or another. As a result, the poor and disadvantaged are left with the feeling of being victims. The interesting thing about this is that insurance companies remain profitable in the three states where it is prohibited from using credit scores, suggesting that the continued practice is based on convenience. A computer can take the data, apply a formula and produce a premium. If humans had to search the archives and make decisions, this would be more expensive and eat into profits.

About the Author:

David Mayer is a frequent contributor to http://www.findyourautoinsurance.com/credit-scores-and-insurance-premiums.html and is a highly regarded writer, having professionally dealt with numerous subjects. Visit the site to read David Mayer’s contributions.

Article Source: ArticlesBase.com – Credit scores and insurance premiums