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WASHINGTON, July 18 — Drivers from low-income neighborhoods of New York, Hartford and Baltimore, insuring identical cars and with the same driving records as those from middle-class neighborhoods, paid $400 more on average for a year's insurance.

The poor are also the main customers for appliances and furniture at “rent to own” stores, where payments are stretched out at very high interest rates; in Wisconsin, a $200 television can end up costing $700.

Those were just two examples among several cited in a report Tuesday showing that poor urban residents frequently pay hundreds if not thousands of dollars a year in extra costs for everyday necessities. The study said some of the disparities were due to real differences in the cost of doing business in poor areas, some to predatory financial practices and some to consumer ignorance.

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Originally posted by beskeptigal

And someone just told me a day or so ago, while shopping for car insurance they were asked to agree to a credit check before a rate quote.

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Originally posted by Paulos23:

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Originally posted by beskeptigal

And someone just told me a day or so ago, while shopping for car insurance they were asked to agree to a credit check before a rate quote.

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That is very common now, and lots of insurance companies use it to help figuer premium or if your a good risk at all. Mind you that is only one is a few indicators they look at. In general insurance companies have found bad credit score = bad risk. It is posible to be low income and have an ok credit score, but it is not easy.

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Everyone knows that if you hit another car, your auto insurer will probably raise your premiums. But you may not know this: Your premiums can shoot up much higher if you run into a new breed of credit score used by insurers, even if you have a spotless driving record and never had an at-fault car accident.

Known as credit-based insurance scores, these numbers are computed from bill-paying and loan data collected by the major credit bureaus. In recent years, the scores have become as important in determining your annual premium as your driving record and the neighborhood where you live.

An analysis by Consumer Reports found that scoring could cost many consumers hundreds of extra dollars. Here's a typical example of how scores can hurt: a 28-year-old single male from Orlando, Fla., with a clean driving record and no accidents would normally pay State Farm Mutual $1,251 a year for a new policy. With one at-fault accident, his premium would rise to $1,447. If the same driver instead fell into the lowest ranking in State Farm's credit-scoring system, however, his premium would shoot up to $2,600.

Even a driver with a great credit score whom lenders would normally bless with a low-interest mortgage could wind up with a less favorable insurance score and thus a high premium. That's because formulations for insurance scores weigh credit data differently from traditional lender scores. Indeed, insurance scores can penalize consumers who use credit reasonably. For instance, Progressive Auto Pro's Financial Responsibility Score will give premium-boosting black marks to a customer whose credit-bureau information says he opened three credit accounts within the previous year, including one credit card in the previous four months, and then made two or more additional loan inquiries without accepting the credit.

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