| |||||
Bad Credit Mortgage Refinance ® |  | ||||
| |||||
|
We're about Mortgage News You Can Use
Posted online: Mon Jan 26 12:08:07
CST 2004 | |||||
| NASHVILLE, Tenn. (AP) — Twenty-somethings Jennifer
and Doug Lee wanted the best deal they could get on their first home, so they
shopped around with various lenders. But doing that hurt their credit score and cost them money on a house in Iowa, according to Jennifer's aunt, Tennessee Senate Speaker Pro Tem Jo Ann Graves. ``They did get a house at a pretty good rate, but she said if she had it to do over again, she wouldn't have shopped rates as much as she did,'' said Graves, D-Gallatin. ``I'm concerned that so many young people out there may not know about credit scores.'' Credit scoring allows an insurer or lender to evaluate an applicant's credit history, and sometimes seemingly unrelated information, to develop a numerical determination of what type of risk is posed. Graves is trying to find out whether the criteria used in Tennessee are fair and whether the state needs to regulate them, or simply should inform consumers about the impact of credit scoring. ``This is really an issue just bubbling up,'' she said. ``I'm not saying it's a negative thing; people just need to be aware.'' Tennessee's Commerce and Insurance Commissioner Paula Flowers doesn't think a consumer awareness campaign would be enough. She would like some of the factors used in credit scoring prohibited. There are things companies should look at, like bankruptcy filings and whether bills are paid on time, Flowers said, ``but some of these seem to be a little bit of a stretch.'' She doesn't like that some credit-scoring models penalize consumers for having several open credit accounts, even if they have a zero balance. Also, consumers with good credit who receive dozens of credit card applications will sometimes get one offering a low interest rate or no interest for a period of time, and will transfer their balance to that card. That also can count against their credit score, Flowers said. Flowers is concerned that some insurers give undue weight to credit scores when calculating a premium or may refuse to write a policy altogether, which could result in a lack of available coverage. Rep. Mike McDonald, D-Portland, filed legislation last year to prohibit the use of credit report information in setting homeowner insurance rates and premiums. A constituent claimed credit scoring caused his premium to escalate so dramatically that he couldn't afford to pay it. McDonald says the insurance agent, who could not be reached by The Associated Press, acknowledged that wasn't an isolated incident. The bill was withdrawn amid concerns it might violate federal law. Several states have passed laws restricting or banning the use of credit scoring. Maryland approved a bill two years ago banning the practice in homeowners insurance and prohibiting its use in underwriting or rating of existing automotive policies. The state also caps the amount a rate may be changed due to credit scores. Texas is considering a cap and last year passed a law that prohibits a company from denying, canceling or declining to renew a policy based solely on credit information. It also prohibits companies from using a lack of credit against a consumer or credit inquiries and medical debt as factors in a credit score. Tennessee law does not address credit scoring, but the state reviews the practice to ensure rates are not unfairly set. Also, a policy established in 1998 requires companies to justify the use of credit scoring and prohibits them from using the scores as the sole basis for setting rates. Rep. Joe Towns, D-Memphis, said he likely will pursue legislation regulating credit scoring, but he'd like to ban the practice altogether. He says it disproportionately affects poor minorities. ``I have little regard for insurance companies. I would almost go so far as to say I detest them,'' he said. ``... When you have to use them or need them in dire times in your life, they want to drop you and they try to use some criteria to create an environment where they have no risk and charge you all these excessive premiums.'' One bill before the Tennessee General Assembly is based on a model act drafted by the National Conference of Insurance Legislators that prohibits income, gender, zip code, ethnic group, religion, marital status or nationality from being used in credit scoring. But consumer advocates say it doesn't go far enough. Illinois-based State Farm Insurance Co., which is the largest auto policy writer in the state, uses credit scoring only to evaluate new customers, according to spokesman Mike Lane. ``It's very predictive of future losses and allows us to match the right price with the right risk,'' he said, adding that the difference in rates between customers with bad and good credit scores could be as much as 30 percent. He said State Farm also uses certain factors to determine a loan underwriting score, such as the number of lender inquiries. But he said that if several inquiries are made by someone shopping a loan on a house within 30 days, it only counts as one. The Tennessee Farm Bureau, which is the largest rural property insurer in the state and No. 2 in auto policies, looks only at credit histories but may turn to scoring. ``We're always concerned about anything that puts restrictions on how we do business,'' said spokesman Anthony Kimbrough. Graves said she doesn't ``want to take a company's ability to protect itself, but at the same time we want to safeguard the consumer. There seems to be a need for balance.'' |
Back to Original Article: Mortgage News You Can Use
Continue with:
Existing Home Sales Surge in December
Fed Looks to Stand Pat on Interest Rates
Bush withdraws mortgage regulator nominee
Home Resales in U.S. Rise to 6.47 Million Rate, Ending Best Year on Record
Greenspan is confident lost jobs will be replaced
CBO Projects Record Deficit
Weak Dollar Helps U.S. Firms, for Now
U.S. Budget Office Deepens Fiscal Gloom for Bush
U.S. Budget Office Deepens Fiscal Gloom for Bush Part Two
Treasuries in No Mood for Risk Before Fed
Rates on Short-Term Treasury Bills Rise
Clinton Criticizes Bush Administration On Economy
Greenspan: Flexible economy will replace jobs
US Treasury's Snow: Global growth to top G7 agenda
US TREASURY OUTLOOK-Consumer mood is market focus
What the Fed is considering at FOMC meeting
Hill budget office sees 10-year deficits totaling nearly $2.4 trillion
Dollar Trade Choppy Before G7 Meeting
Major business and economic events
Economic growth could be derailed by soaring energy prices
Eliminate Credit Card Debt - San Diego Real Estate