Credit Reporting Mission Creep

Home and Car Insurance

If you're planning to take out a car loan or apply for a home mortgage, you probably won't be surprised that prospective lenders want to take a look at your credit report. After all, the ostensible intent of the credit reporting system is to use your past credit history to help lenders predict how likely you'll be to pay back a new loan. But events become stranger once you've bought the car or house and need to insure your new property. Chances are, the insurance company wants to pry into your credit history as well. The result? If you've had difficulty paying bills on time, you're likely to be paying more for home and auto insurance.

 Insurance companies' use of credit reports is one part of the "mission creep" of credit information I describe in the recent Demos report "Discrediting America."  Once purely the province of lenders, for-profit credit reporting agencies like Experian and TransUnion have marketed the use of credit information for a wide range of other purposes, from employment decisions to how patients are asked to pay for medical care at the hospital. It turns out insurance companies are also in on the game.