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Not a lawyer, but experience in this business Posted by Bill Homer [Email]  (#3427) [Profile/Gallery]
(more from Bill Homer) on Sat, 13 Jan 2007 22:00:47
In Reply to: Any lawyers to chime in?.., Mike Lynch  [Profile/Gallery]
, Sat, 13 Jan 2007 12:46:34
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This is going to be a short summary, because I could go on for hours talking about this.....
Basically, credit records are kept by three major agencies in the US (Experian, Equifax and TransUnion), and cover most adults who have ever had a bank account or some form of credit, i.e. loans, charge cards, etc. These records consist of 333 attributes (not all apply to everyone), and although ocassionally flawed, provide the most accurate summary record of your financial activities. Some of these records include your address, what type of dwelling (single family home, apartment with numbers of units), general income information, and credit history divided into dozens of different groupings - including late payment, percent of credit line that is late and number of days late.
By law, credit records are commercially available for the purposes of extending credit or insurance. Bulk records are sold by the three credit agencies to processors and various analysis is done. This is quite popular for creating targeted lists ("you have been pre-approved for XYZ credit card or insurance coverage"). Using techniques such as pattern recognition produces far more accurate lists of potential customers than any other method available.
The insurance companies are obviously in the business of making money. Their object is to extend insurance to as well-known a risk pool as they can, maximize their profits, but remain price-competitve to their competiton. Given the billions of dollars at stake, you can be sure that they have performed many studies on the correlaton between credit attributes and driving records, and have found a strong relationship.
If certain attributes like having store credit cards on your record negatively affect your credit score, this is due to their experience, not a random choice. One could make logical assumptions on insurance risk, say that a black Trans Am would have a higher expected loss rate than a white Prius, the other attributes are purely mathematically derived.
posted by 75.34.26...
, Fri, 12 Jan 2007 13:33:28, Fri, 12 Jan 2007 18:04:32, Sat, 13 Jan 2007 12:46:34, Sat, 13 Jan 2007 22:00:47 <-- Viewing This Message
, Fri, 12 Jan 2007 10:04:35
, Fri, 12 Jan 2007 08:48:22
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