Posted by Lee/AR on 6/3/07 9:43am
Msg #193417

OT... waaaaay OT...Auto Insurance question.

Know some NSAs primarily also sell insurance. Just got my Premium notice--which tells me that my Premium was 'not the best' because my credit report does NOT contain any info on Auto loans or leases. WTH is with that??? Why would paying cash for a car be a negative??
I don't buy new cars--just low-mileage used cars. I can think of no logical reason that little fact should have a 'negative' impact.

Reply by kcg on 6/3/07 11:00am
Msg #193426

Re: I also hope an insurance agent answers..

why does one's credit report affect auto and home insurance? If you pay your premiums and don't have claims what the heck does it matter? A friend of mine got a cancellation notice for home insurance after years of being with the same company, no claims, prompt payments because they did a random check of her credit and found a couple bad marks (medical, of course).

Anyone know the answer?

Reply by NCLisa on 6/3/07 12:25pm
Msg #193441

The theory the insurance companies have

is that if you have negative credit you will burn your home or business down or wreck your car for the insurance money. Clark Howard talks about this alot.

The way it really works is that the people with good credit that start living above their means are the ones that do the above things. It is the desperation to keep your lifestyle that drives people to do stupid things. Works with embezzling also. I've never seen an embezzler that was a poor person looking for a better life, it's always been a person living the good life that starts to embezzle to lead an even better life.

Reply by Lee/AR on 6/3/07 1:04pm
Msg #193445

Re: The theory the insurance companies have

So how does not having an auto loan give me negative credit? My house is paid for, too. Still doesn't make any sense to me.

Reply by NCLisa on 6/4/07 7:44am
Msg #193513

Your credit score is based on your available credit

so if you have paid cash for everything, and don't have credit available to you, you don't have a good credit score.

If you have 20 credit cards, and they all have no more than 1/4 to 1/3 of their balances used, then you will have a better credit score than if you have 3 cards with 3/4's of their balances used. My father had a credit score of 811 before he died, the best you can have is 850, and that is rare. My father had many credit cards, and they all had 0 balances and no annual fees. He'd cut up the cards, and not use them, so he had ample available credit and all his purchases were made on 2 different cards and a gas card. His score would have been even better if he'd spread those purchases out even a little more, but once you hit the 800 mark, you really don't need to worry about a better credit score.

Reply by Gary_CA on 6/3/07 2:01pm
Msg #193447

Three questions, two answers... none of it makes much sense.

I was an insurance agent briefly in the late 80's... and my old boss in now one of my favorite clients... so I'm no expert, but know enough to get me in trouble...

1) Why would not having an auto loan or lease be a negative on my credit?

A. A variety of different credit products, a good mix, makes the computer happy... So if all of your debt is credit cards, that's out of balance. Doesn't make much sense in your case, but you know that score has gotten pretty good at nailing down who pays and who doesn't... that's why it's so all powerful. SO... First thing you need to do is pull a credit report and take a long look at it.

2) Why would having bad credit make you a bad insurance risk (okay that wasn't your question... later in the thread).

A. Not just the possibility of insurance fraud... there's also the fact that folks who are short of money or spending recklessly, i.e. bad credit, tend not to take care of maintenance and other liability issues. This is a big factor when insuring businesses. Not so much in personal lines, but it still holds some... if you're over extended there's lots of things happening to increase the risk besides fraud. Besides which insurance companies are sorta extending you credit when they receive monthly premiums (not really, because you're always paying ahead.)

3) Why would buying a car cash be a negative.

No answer here... doesn't make a helluva lot of sense. I'm not sure whoever explained that to you knows what they hell they're talking about.

Recommendations.

#1. Get your credit report and make sure it's clean. If you don't like the score talk to someone about legitimate ways of increasing it. (You sound like the cash and carry type, you might improve your score by a little more credit use... good responsible conservative paid every month activity... and you can get some trips and crap too.)

#2. Shop your insurance. There's more than one fish in the sea... Normally I wouldn't change companies unless I could save a good chunk, but it sounds like maybe it's time to dump these chumps even if it's for the same price or a small savings.

Just my two cents... worth exactly what ya paid for it.

Reply by Linda Juenger on 6/3/07 2:30pm
Msg #193449

Re: Three questions, two answers... none of it makes much sense.

Also, some companies drop you not because of amount of claims, but that you are due for one. Law of averages. Even if you haven't had a claim for a long time, in their oppinion you are high risk. We as SA's drive lots of miles. At some point we're going to have an accident. Just law of averages. My husband put over 800,000 on his big rig in 6 years. Over those years, we've had 2 very small claims. That's pretty good for the miles he drives. We hold our breath every year that the insurance company doesn't drop us due to the law of averages. There are only 2 insurance companies that will even insure us in the state of IL due to hauling hazardous materials (gasoline, diesel and jet fuel). We pay dearly for it too. I know this is totally different than an individual vehicle. On a sad note, 22 years ago, we had one of our tanker trucks turn over, our driver was killed and 9,000 of gasoline burned up. It was absolutely horrible. 53 years in business and the law of averages eventually caught up with us also. It happens.

Reply by Lee/AR on 6/3/07 3:07pm
Msg #193454

Thanks, all. I kinda like to, at least, have some idea of

the answer before I ask the questions. Yep, no other debt except cc's--unbalanced. I'm also an NSA--double unbalanced...LOL. Appreciate the comments.

Reply by BrendaTx on 6/3/07 3:52pm
Msg #193459

Re: Thanks, all. I kinda like to, at least, have some idea of

"the answer"

Yep...having the NR community is kinda like having team of sages, soothsayers, oracles and a few Dutch uncles ready to offer experienced/wise input on nearly any problem.

Reply by Lee/AR on 6/3/07 7:05pm
Msg #193469

You got that right, Brenda. NotRot rocks, even on OTs! n/m

Reply by Dennis D Broadbooks on 6/4/07 9:00am
Msg #193524

I Intended to Reply to This Yesterday...

...but my day got away from me. First of all it's accepted practice in all 50 states (unless there's one out there I'm not aware of...so to be safe I'll just say virtually all 50 states) to allow insurance companies to utilize credit scoring for premium rating purposes. Each company can implement the credit scoring in the way they see fit, but this is the first I've heard of a company penalizing an insured for not having a loan on their auto. In fact I just went in to the rating web site for one of the major companies I write through to see in a real life example how they differentiated in premium for both an auto & a home quote. The rate on the auto was exactly the same whether there was a lienholder on the vehicle or not, BUT they give a fairly significant discount if there's NOT a mortgage on the home. This is exactly the opposite of what you're experiencing with your car insurance carrier. The only reason I can come up with in your particular case is that sometimes you don't have ENOUGH credit history for a company to rate you on. Our family situation is like yours in that our home is paid for as are our autos. I've been told in the past that sometimes not having a credit history to go on can be detrimental. This situation reminds me of an elderly couple who came to me for their homeowners insurance several years ago & the company I wanted to write them through wouldn't take them in their preferred company because their credit score didn't exceed their minimum of 700. This couple was very well off financially as he was a former doctor. They didn't owe anyone a dime & paid cash for everything. Not even a credit card. As a result there was no credit history to go on & their credit score took a hit as a result. I'm not here to defend the practice of credit scoring to rate an insurance policyholder. The reality is that it's here to stay & can be defended statistically by the insurance companies. It wouldn't have the widespread acceptance across the country if there was no validity to it.

As is my custom, my comments are not to be construed as insurance or legal advice. They're based on my 30 years of property & casualty insurance experience here in Missouri.