The ubiquitous three-number credit score is a powerful force in U.S. finance—and everyday life. Banks use scores to determine who gets a loan, landlords rely on them to choose who rents an apartment, and auto insurers in some states depend on them to decide who’s riskier. Now, the insurance industry and Washington state regulators are at odds over whether the scores are a fair measure to figure out who’s a good driver.
Mike Kreidler, a Democrat who is the state’s elected insurance commissioner, has been pushing for a rule to temporarily ban the use of credit scores in setting auto rates, as well as for homeowner and renters’ coverage. He says he’s aiming to minimize the impact of the economic disruptions brought on by Covid, but his concern about the use of the scores is broader. Kreidler says they tell an insurer more about whether the consumer is rich—and potentially a more lucrative customer who might buy more coverage—or poor, which unfairly disadvantages consumers who are already financially stretched and disproportionately hurts people of color. “It is not a predictor to how you drive a car, it is not a predictor to how you maintain your home,” he says. “Rich people don’t file claims as often as people who are poor. It doesn’t mean that they’re better drivers.”