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Dear Debt Adviser,
I received my FICO score and VantageScore ranking
this morning. My FICO score was 5 points less
than my VantageScore ranking, yet FICO gave me
a "good" rating and Vantage gave a "nonprime"
grade D scoring. My vehicle insurance went up
because of this score. Is there any way to dispute
this?
-- Stephanie
Dear Stephanie,
Don't I wish you could dispute your insurer's decision! My insurer did the same thing to me while insisting I was still saving more
money on my insurance than if the company didn't use scoring. Go figure.
What's really interesting about your situation is the big difference in how FICO and VantageScore rated your scores.
First, let me talk about my actuarial friends. Insurers have the right in most states to view your credit history and
include what is found there in their calculations of your personal risk.
Why? Well insurers say -- and our fearless state representatives agree -- there is a correlation between how a person
handles credit and the likelihood of filing an insurance claim.
So to help everyone manage the difficult situation of who gets charged what rates, or gets coverage at all, insurers
rely on a scientific model. All things considered, it is probably fairer than the old insurance underwriting technique of redlining
based on neighborhood or race.
The bottom line of the situation is that insurance credit scoring is here to stay.
You can ask the insurer's customer service why your rates went up, but you'd probably have more luck asking my cat
Stinky for answers! Each company has its own scoring models and considers them to be trade secrets.
However, you can get a version of
your generic insurance score from TrueCredit.
You will receive an auto and homeowner's
coverage score along with advice for improving
your score. Insurers may not look at the information
contained in your credit reports and scores in
the same way that a potential lender would. For
example, an insurer may be more interested in
your payment history than in how much you owe.
Your FICO and VantageScore credit scores are based
on the information contained in your credit reports
at each of the three major credit bureaus -- Experian,
Equifax and TransUnion. Because each bureau has
different data in its files about you, you will
have a different score depending on which type
of data they use.
Although you cannot dispute your scores, you can check your credit reports to assure that the information used to calculate
those scores is correct. If you find inaccurate or out-of-date information, you should file a dispute with the bureau that reported it.
VantageScore is a relative
newcomer to the credit-scoring industry. It
was developed by the bureaus and they claim the
VantageScore ranking is more up-to-date than a
FICO score. Different math and weightings are
used to figure your score and each has its own
range of scores. FICO scores go from 350 to 850,
while VantageScores range from 501 to 990 and
also include a letter grade.
Once you have your credit reports in the best shape possible, your only other alternative for saving money on your insurance
premiums is to shop around with different insurance carriers. Because insurers each use their own scoring systems, you could have a much
better score with carrier A than you do with carrier B, and your premium will reflect that.
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