29 January 2012

The Alarmingly Increasing Use of Credit Reports

You know the drill.

When you apply for a car loan, a credit card, or even a home mortgage, your credit union will pull your credit report. A credit report shows how well you have handled your debts: Whether you pay your bills on time or late, whether you had a civil court judgment entered against you, whether you filed bankruptcy, and so on. After all, your credit report is personal to you.

As such, you have every right to keep anyone that does not have a need to know from dabbling into your credit report. Unfortunately, credit unions (and banks) are not the only ones that pull your credit report; other entities such as insurance companies and prospective employers are dabbling into your credit history.

With the recent economic downturn in America which has resulted in so many people losing their jobs (and the defaults and foreclosures that have followed), the credit reports of those who could not pay their bills because of job loss have been tremendously damaged. The end result: People are being turned down for a service or benefit all because of a credit report.

(There is also another element of a credit report called a credit score, but we'll just use the credit report in our discussion. After all, credit scores fluctuate from time to time but your credit report is a history of how well you have managed your debts. Most entries on a credit report remain for 7 years, with the only exception being bankruptcy which remains on your credit report for 10 years. Besides, a bankruptcy is akin to a nuclear attack on your credit report - your credit report and score takes a nosedive making it difficult for you to obtain credit.)

First, let's talk about the insurance companies. In particular, we'll talk about the auto insurance companies that want to dabble into your credit history.

Back in the old days, when you applied for auto insurance your prospective insurer took a look at your driving record to see if you had any tickets or serious violations such as DUI. Your prospective auto insurer also considers other variables such as whether you are male or female, single or married, and under 25 years of age or older. Based on this information, your insurer gave you a quote and if you were a safe driver, your insurer rewarded you with discounts.

Today, insurance companies have added another variable in underwriting auto insurance policies: The use of your credit report. Various elements of your credit report are used and the outcome is an insurance score. A bad insurance score could mean either higher premiums or outright denial of coverage. It has been reported that people that have good credit somehow get a poor insurance score.

One insurer - Travelers - makes a claim about the use of credit reports in determining what you pay for auto insurance. You can read their justification as to why a credit report should be a factor in what you pay for auto insurance.

The insurance companies claim that the use of credit reports is a predictor as to if a claim will be filed in the future or if an individual will commit insurance fraud. The way I look at it, that places people who have been impacted by insurance scores as a result of their credit reports as second class citizens.

After all, the use of credit reports by the auto insurance industry and labeling individuals as if they are a potential to have an auto accident or make a false insurance claim or even commit insurance fraud in the future amounts to nothing more than legalized discrimination in the name of insurance company profit.

What you can do: Do a search using your preferred search engine (such as Google) for "auto insurance without a credit report". There are companies out there that will write you an auto insurance policy without checking your credit report.

If you are applying to a well-known insurance company, be careful if you are asked for a Social Security Number and/or your state driver license number. These can be used to pull your credit report. I have heard horror stories that these credit report inquiries - which are supposed to be soft inquiries - are actually hard inquiries.

By the way, a soft inquiry does not have an impact on your credit report while a hard inquiry will not only impact your credit report, it will also drive down your credit score as well.

You have the right to say "no" if your insurer or prospective insurer will pull a credit report as part of the underwriting process. After all, your credit report is personal to you and you have every right to keep your insurer from dabbling into your private business. More than likely your application for insurance or renewal will be denied; but like I mentioned earlier, there are auto insurance companies out there that want your business without having to pull your credit report.

Now on to another alarmingly use of credit reports: Prospective employers when you apply for a job.

Traditionally, the only time a prospective employer would pull a credit report on you is if you were seeking a position of trust, such as a position in the financial services industry or in a position of public safety such as a police officer. That's the way it should be, as pulling a credit report as part of a background check is protection for the employer.

Unfortunately, when the American economy tanked unemployment skyrocketed and home values plummeted, placing black marks on the credit reports of people who otherwise had a steady job and paid the mortgage. At the same time, prospective employers resorted to harsh tactics to keep people from getting a decent job: The use of discriminatory language - completely legal - in saying that applications from prospective employees who are out of a job will not be accepted, as well as the routine use of credit reports when there is no justification based on the job and its duties.

In short: One who applies for a job and is hired, only to find out that he or she is terminated due to a credit report. What does a credit report have to do with an ordinary job when it's not justified?

What you can do: During the application process or even at the interview, find out what the background check will entail related to the position you are applying for. Again, your credit report is personal to you and you have a right to say "no" if you find out that your prospective employer has an unjustified reason for pulling your credit report.

If you refuse to permit your prospective employer to run a credit report on you, more than likely you will not be offered the position. After all, unless there is a major justification for doing so employers have no business dabbling into your financial affairs by pulling a credit report.

After all, we lock up our valuables in a place that is safe and secure and only let people that have a need to know to find out where it is. The same thing can be explained when it comes to your credit report.

Your credit report is personal and confidential to you, and the only entities that should be allowed to see your credit report are credit unions and banks as part of the loan underwriting process. You have every right to see that your credit report is guarded from unauthorized disclosure or access without your consent.

And as for those insurance companies who have a justified need to dabble into your personal affairs by pulling a credit report, this is how I look at it: My credit report is none of your business, period.

Speaking of credit reports, if you haven't pulled your once a year credit report, you can do so over at AnnualCreditReport.com. It's a good idea to check it at least once a year to catch any discrepancies that may show up. Moreover, you are also entitled to a copy of your credit report from a specific agency if adverse action was taken against you and a credit report from a particular credit reporting agency played a role in the decision; the name of the credit reporting agency will be in the letter you receive from the entity that denied you a benefit based on your credit report.

If you got a horror story about your experience when you apply for auto insurance or apply for a job and adverse action was taken against you thanks to the unauthorized use of your credit report, please feel free to share it here by making a comment. Please, no personally identifying information.

21 January 2012

SOPA and PIPA: Threats to Internet Freedom

Imagine a world. In fact, imagine an Internet world.

Now imagine an Internet world without:

Wikipedia
Facebook
Twitter
YouTube
WordPress
Blogger
AKDart.com
Skyscraper City and its road related forums
eBay
EdwardRingwald.com
Interstate275Florida.com
and the list goes on and on...

Sound scary, doesn't it?

If you tried to go to some of your favorite websites on Wednesday, 18 January 2012, you more than likely was greeted by a special page instead of the site's regular home page. What happened was some of these sites went dark in protest of two proposed United States federal laws that would have meant the end of the Internet as we know it today: The Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA).

Now why should you be concerned?

According to this page from the Electronic Frontier Foundation, this is what SOPA and PIPA is all about in a nutshell: The new laws would have given government as well as Corporate America the power to interfere with the underlying infrastructure of the Internet. More alarmingly, the SOPA and PIPA would have given both government and Corporate America unprecedented power to shut down legitimate websites.

That's right, legitimate websites created by the little guy who wants to make his presence out there on the Internet. What Corporate America would do is to shut down the little guy's website with just a court order to the little guy's ISP or web hosting provider. I could go on forever talking about SOPA and PIPA but here's a YouTube video I found that explains the subject very well:



Luckily, SOPA and PIPA have been put on the back burner for now. The next time you think of SOPA and PIPA having an effect on the Internet as we know it, this is what can happen:



Sound scary? Be glad this is America, not China, Cuba, Myanmar (Burma) or even Saudi Arabia where Internet censorship is common and a routine way of life.