Debt Consolidation and Credit Card Counseling

Companies often check your credit report without telling you

The importance of a credit report cannot be overstated. Consumers with a credit history will find that nearly everyone with whom they do business will check their credit report from time to time. Landlords do it to see if an applicant is a good risk to rent their property. Potential employers do it to see if a job candidate comes with added risk. Creditors and lenders check it to see if a customer has a good history of paying his or her bills. The part that many people don’t realize is that some companies also check the credit reports of their customers to see if they can use the customers’ credit scores to justify raising their rates.

That’s fine, as far as it goes. But some companies do this without letting their customers know that they have checked their credit and then they raise the rates without letting them know why they have done so. If the rate increases were based on false or erroneous information on the credit report, the situation gets even worse and the customers get even madder. That’s what happened with a recent lawsuit against insurance giant Allstate.

Allstate has agreed to settle the case without admitting guilt, but according to the lawsuit, between 1998 and 2004, the company allegedly did a number of things, including the following:

• Raised the premiums of customers with poor credit and denied favorable rates to customers with good credit, all without telling them. This violates the Federal Fair Credit Act.
• Reviewed the credit reports of other family members besides the principal customer.
• Reviewed credit reports for reasons other than those allowed by law.

Allstate has agreed to make restitution to those customers who were affected and who applied to be a part of the class-action lawsuit. It has yet to be determined exactly how much money will be awarded to each customer.

Few consumers realize that companies with whom they do business may regularly check their credit reports. Many companies, including credit card companies, use these credit checks to determine if they should raise interest rates for their customers. This is often done without the knowledge of the consumers involved, although they are generally informed as to why the rates are raised later.

Many creditors basic policies have what is known as a universal default clause. This clause in the billing documents essentially states that companies may raise your rates or fees if you make late payments to anyone. This can cause the interest rate on your Visa card to increase if you have paid the phone bill late, even if you have paid your Visa bill on time. It is perfectly legal, provided that the companies involved let you know what they are doing and why. It appears that Allstate may note have done that, and the lawsuit has resulted.

For this reason and others, it may make sense to regularly check your credit report for errors. An error on your report could cause you to pay more money without justification, and you don’t want that, do you?

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