Get a CLUE About Your Insurance Score

A reader e-mailed me to voice her distress over her auto insurance rates. Prior to her divorce, she and her husband had been able to obtain reasonable rates for their two cars. But the divorce was messy. Their house fell into foreclosure as it languished in the stagnant real estate market. Bills that were supposed to be paid by her (now ex-) husband went into collections. Her credit score began dive. She eventually filed for bankruptcy. As things went from bad to worse, she was stunned to learn that her application for new auto insurance coverage was denied.

"I've never filed a claim or gotten a ticket for anything!" she wailed. "My husband and I always paid our insurance on time, and my driving record is totally clean!"

One thing that may have impacted her ability to get insurance for her car is her credit history and public records information. Insurance rates for homes and cars are often linked to credit scores. Insurers justify increased rates by relying on statistical analyses that purportedly show a correlation between an insured's credit history and likelihood of filing a claim.

This means if your credit file shows a history of late payments, foreclosure, tax liens, garnishments, bankruptcies, lawsuits and judgments, you may be smacked with high insurance rates or even be denied coverage.

This data - plus any information on claims you have filed (and sometimes even inquiries about your coverage that do NOT result in a claim) - is entered into a little-known database called CLUE (Comprehensive Loss Underwriting Exchange) or its smaller competitor, A-Plus. These national databases are used by insurers to determine whether you get new insurance. Insurers may also look at your claims history and "insurance score" when deciding whether to renew your coverage or how much to charge for your premiums. Because it is a national database, other insurance companies can review your claims history for five years. This may include losses for a property before you even owned it.

Some home buyers learned this the hard way, with deals falling through because of inquiries - not necessarily claims - that cause the property to be "blacklisted." The previous owner may have inquired about coverage for water damage; even though the owner may never have filed a claim, the information is posted into the database, and insurers will assume that there is a problem.

Consumer advocates have been pushing hard for reforms. As a result, some states have passed legislation to prohibit the inclusion of inquiries that did not result in a paid claim. Other states have begun passing laws to limit or prohibit the use of credit scores as the sole determining factor in deciding insurability or rates (see if your state has such laws); however, many insurance companies still rely on them to some degree.

Given the fact that 79% of credit reports contain errors, it may be concluded that rates may be artificially inflated or insurance unfairly denied when determined - in whole or in part - by credit history.

The good news is that this specialty report is governed by FCRA. Under the FACT act, you have the right to obtain a copy of your CLUE or A-Plus report each year, and the right to dispute inaccurate or incomplete information on those reports. If you have been denied coverage, had your policy cancelled or your premiums have increased, the insurer must notify you in writing; in addition, you are entitled to a free copy of your report (in addition to the free report you are allowed each year).

To get a copy of your CLUE report, visit ChoicePoint's Web site or call toll free: 1-866-312-8076. To get a copy of your A-Plus report, call toll free: 800-627-3487.

You will not get your actual insurance "score" - just the history of claims. Because your credit score is factored into whether you are insurable and what your rate will be, you should also purchase your credit score as well in order to get a complete picture of what your insurance company is seeing.