The influence of the three credit-reporting bureaus in America has gone a bit over the top, if recently observed experiences are indicative of a trend

There is an unspoken, unrecognized power in this country. There is a dependence on a financial services Triumvirate that wields unlimited power. This is a power we are not permitted to face, and from which there is no recourse. Because this Triumvirate holds the sword of Damocles over all of us, we cower at its might. The thought of being on the bad side actually invokes dread in most of us. No it is not the court system; in fact, it is not our government at all.

According to Jonathan Glater in a recent NYT piece, "It is generally legal to run credit checks on job applicants, but some states have restrictions. In Washington, which has perhaps the most stringent requirement, a candidate’s credit history must be substantially related to the job under a law that took effect in 2007. Last month, lawmakers in Hawaii approved a measure that generally allows an employer to review a credit history only after making an offer and requires the credit check to be 'directly related' to job qualifications. In California, Gov. Arnold Schwarzenegger vetoed a similar law. New York law requires a background check’s findings to be related to the job, but it addresses criminal records and does not mention credit checks. Lawmakers in Michigan and Ohio have proposed barring employers from using credit history in making employment decisions."

“In my opinion, it’s discrimination,” said Representative Jon Switalski, the Democrat who proposed legislation in Michigan. “If you miss a few payments or you have medical debt, your skills as a pipefitter or an electrician don’t diminish.”

Call me the quintessential conspiracy theorist if you will, but whenever I smell a rat in any situation involving money, I am immediately suspicious. Moreover, I'm convinced that the over-use of credit reporting has infiltrated far-reaching fingers into the financial services and insurance sectors, used as an excuse to bend-over those least capable of defending themselves.

Back in the day, a credit evaluation was part of a more labor-intensive process, mandated to be fair and based on reasonable risk as evaluated by multiple minds’ opinions of what criteria were appropriate to the purpose of the evaluation. If you were shopping for furniture, and were a young married couple, a couple of missteps with credit cards before they were together, even a few late payments before the baby came were tempered by the stars in a young couple’s eyes, certain of a future of hard work and a happy family.

Over time, I suppose I missed the transition; somewhere among the last twenty-years since I paid very much attention to such things, credit-reporting became a viable justification for predatory business practices among some of our Insurance Industry brethren.

One recent example involved an Allstate agent's quotation for homeowners’ coverage, originally quoted at just over $900 for the year. The rate was raised to $1,386 when a raw credit score under 500 was reported from Experian. Apparently it is company policy to increase premiums in such cases by 50%, without recourse to review or appeal by their underwriting department.

The woman at the Texas Department of Insurance was very nice, informing me that insurance companies are permitted to use credit reporting criteria within individual company formulae for determining rate. Actuarial science perhaps has data in support of elevated risk irrefutably attributable to a low credit score. Perhaps there is no actuarial science in support of elevated risk irrefutably attributable to credit scores at all. It has been hinted by some who should be in the know, that credit scoring is wholly subjective, although credit results within industries are used to evaluate the effectiveness scoring criteria.

Basically, the process is more random than I had thought.

My gut instinct is that there in the case of someone purchasing homeowners' insurance is probably not likely to hose his own property, based simply on his having had past income-stream interruptions. What I question most is the existence of documentation, the evidence in support of the position that a low credit score increases the risk that your house will burn to the ground, or be stripped clean by the criminal element in and around Travis County, Texas, in the commission of a felony.

Is Allstate implying that someone with money problems is more likely to burn his own house to the ground, or strip it clean in the commission of a felony? Or is Allstate simply in position to force someone who has had some financial issues in their past, to “assume the position” based on a low credit score, just because there is no one to stop them. Wholly unfortunately, I feel the truth of that supposition ringing like the harmonics of an expensive wind-chime.

Having had my share of credit issues in a previous life, it has been my experience that people with bad credit were more likely to have been ground up in the machinery of the system, than to have intentionally defrauded anyone. Many have had insurmountable balances due piled on them by a hospital. Many have lost their jobs, and are lucky to still own a home. Whatever the cause, most folks credit scores lag behind changes in their financial situations. Lots of customers with amazing scores are recently without gainful employment; lots of folks with low credit scores have recently achieved incomes well into six-figures.

Attempts to speak with someone at Experian, asking a very nice woman on the phone what recourse a person in such a situation might have, netted what should have been expected: they have no control over how any specific client company might use credit information supplied by a consumer in the course of business.

My curiosity aroused, I contacted Allstate in an attempt to speak with the underwriting department. Of course those extensions can’t be accessed by customers. I am left curious, wondering if the insurance industry might enjoy unfair economic advantage over those unfortunates with bad credit scores. I am left wondering if Allstate simply uses an unexamined raw credit score as unregulated license to take unfair advantage of an entire class of citizenry, simply because there is no one to stop them.

Finally, I’m left wondering if there is room for abuse here. The Triumvirate is inviolate, unapproachable. There is no appeal, other than through major legal expense and a serious time commitment poured through the US Mail. Insurance companies are apparently making Billions in what has the potential to be just another price-gouging scheme by just another faceless multinational.

As a brief post-script to this story, the situation was ultimately resolved when a bright young independent agent arranged a policy for this otherwise upstanding family, with a non-admitted carrier that did not use credit-reporting as a criterion upon which premiums were based.

In that I'm a proponent of constructiveness in my criticism, each state's Insurance Commission is tasked by the legislature under which it operates to carry out the will of the constituency, as espoused by our duly elected. The cure for any insurance company abuse, indeed the shortest distance between what we have now and virtually any behavior we would like to dictate to our insurance industry, is the legislative mandate empowering our network of state insurance departments and commissions. If we don't like that health insurance companies deny every claim, pending a ridiculous appeals process that ultimately results a lot of expense for everyone, we simply change the way they do business.

It makes sense that an insurance carrier might consider a poor payment history in deciding how a homeowner might PAY for the policy, whether or not to extend payment terms to a given party. In most cases, homeowners' insurance is paid in full, up front by the lender, and paid monthly by the homeowner as part of his mortgage payment. It strikes me as discriminatory to base the actual premium on a poor payment history; it strikes me as abusive and litigable to base that premium on a raw credit score, that can so easily be the result of catastrophic medical debt, layoffs in the engineering profession, or other factors out of the control of the individual.