Credit Scoring Bill Goes to Colorado Governor

A bill that limits the use of credit histories to set insurance rates got final approval from state lawmakers on May 5 after they gave up trying to ban the practice.

Under the measure (Senate Bill 216), insurers wouldn’t be allowed to rely solely on someone’s credit history to calculate an insurance rate and wouldn’t be allowed to count the lack of credit history as bad credit.

The bill largely adopts standards favored by the insurance industry, rules that are now in place in 22 states.

However, the bill goes further: insurance rate calculations could not include debts run up by identity thieves or ex-spouses.

The bill now heads to Gov. Bill Owens.

Sponsors Rep. Mark Cloer and Sen. Doug Lamborn, both Colorado Springs Republicans, said insurance companies should not rely on credit histories at all. Cloer said the practice, called credit scoring, discriminates against low-income people.

But Cloer said he didn’t seek an outright ban because Owens would probably have vetoed it.

“It’s better than what we have now, and it’s what we can get this year,” he said.

Insurance companies say they should be allowed to use credit scoring because people with bad credit generally file more claims. The companies say most people have good credit, and credit scoring helps keep them from paying more to compensate for those who don’t.

The companies also say people with bad credit come from all income groups.

Mike Benson of Farmers Insurance Group said people who mismanage money and pay bills late are likely to postpone home repairs or buy new tires, making them more susceptible to accidents.

“Insurance companies don’t care why. They simply look at the data, and the numbers are irrefutable,” he said.

Rep. Joe Stengel, R-Littleton, disagreed.

“Your credit doesn’t determine whether lightning strikes your house,” he said.

The vote came late in the day. Lawmakers first had to work out a compromise because the bill affected another measure dealing with homeowners insurance and credit scoring.

That measure (House Bill 1292) had been changed earlier to include a ban on credit scoring against the wishes of the sponsor, Rep. Lori Clapp, R-Centennial. Clapp asked the Senate bill to strike that provision from her bill so Owens would be more likely to sign it.

Lamborn reluctantly agreed.

Clapp’s bill would prevent insurance companies from considering an inquiry about whether to file a claim as a claim.

Some companies keep records of such calls even if they don’t end up paying anything to the homeowner.

Cloer and Lamborn’s bill would regulate credit scoring for all kinds of insurance regulated by the state, including homeowners, auto, fire and life.

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