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Sunday, May 28, 2023

COLUMNS & FEATURES–Someone Is Tracking Every Financial Move You Make

Do you know how many credit, insurance and anti-fraud bureaus keep tabs on how you behave? Neither do I, but it’s many more than we think.

You’re familiar with credit bureaus (the three biggies: Equifax, Experian and Trans Union). They record your debts and bill-paying history.

But that’s only the start of the line of footprints you leave behind.

Here are some other databases that know your name:

-If you write a check to cover a purchase: The merchant might use a “risk system,” such as Equifax Check Solutions in St. Petersburg, Fla.

The clerk runs your check through a reader, which picks up the number at the bottom of your check. That identifies your bank and the account number. The clerk might also punch in your driver’s license number.

In seconds, the risk system checks whether your license is valid and whether there’s any record of your cashing bad checks. Merchants report bad checks.

Risk systems also buy information about bank accounts that have been closed. So they know if you’re trying to write a check on a closed account.

The system might also check the transaction against a broader model of riskiness.

“Say someone comes into a small electronics shop in East Los Angeles at night and presents a $3,000 check for a laptop computer,” says Jeff Carbiener, general manager of Check Solutions. “Our models would say, ‘This looks like a high-risk transaction’ risky neighborhood, risky hour, risky type of purchase.”

The computers check 20 risk variables and produce a weighted score. Check Solutions rejects less than 1 percent of individuals a day, Carbiener says.

If your check is turned down because of something in your report, the retailer should give you Check Solutions’ 800 telephone number (or the number of any other risk system it uses).

You can find out what the problem was and dispute an item you think is wrong. Bad checks stay on your record until they’re made good, or a maximum of four years, says Carbiener.

-If you want to open a bank account: Banks use their own or shared check-reporting systems to see if you’ve written checks that bounced. They also look at your credit report. If you’re turned down, they should tell you the source of their information, so you can check its accuracy.

-If you apply for a mortgage: Mortgage reporting agencies pick up your file from each of the three major credit bureaus, merge it into a single report and deliver it to mortgage lenders all within minutes.

They also deliver a “risk score,” based on this information, says Ter Gothe, a senior vice president at First American CREDCO in Poway, Calif., among the largest services. Scorecards assign plus or minus points to various behaviors, to create an overall score. Most lenders will show you your mortgage report, Gothe told my associate, Dori Perrucci.

Risk scores are used in almost every lending decision today, not just mortgage lending.

Two-thirds of your score depends on your bill-paying record and how much debt you have, says Craig Watts of Fair, Isaac in San Rafael, one of the leading risk-score providers. Most of the rest relates to how long you’ve had credit and of what type.

-If you’re applying for life or health insurance: The insurer will check with the Medical Information Bureau. That’s where insurers file anything they know that might raise a question about your health status and longevity, such as illness, overweight, psychological disorders or a family history of certain diseases. They’ll also note risky activities, such as reckless driving and hazardous sports.

This information affects whether you’ll be offered insurance and, if so, how much you’ll pay. You can get your report for $8.50 from the MIB Information Office, P.O. Box 105, Essex Station, Boston, Mass. 02112, or call (617) 426-3660.

The report is free if you were turned down for coverage, or charged a higher rate, based on MIB information. You can dispute anything you think is wrong.

-If you apply for auto insurance: The insurer will probably run your name through ChoicePoint in Alpharetta, Ga., or a similar service. That’s a database of past insurance claims, in your name and for every driver at your address.

If you’re turned down for coverage based on ChoicePoint data, you can check your report at no cost. Otherwise, there are three different reports you can order for $6 each: a credit report, a report on the claims you’ve made, and a driving-record report. Call (800) 456-6004.

Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington D.C. 20071-9200.

Is Your Long-Term Care Plan Surviving?

The long-term care industry is consolidating. Two major companies recently sold their LTC business and a third is trolling for a buyer. A sale delivers the policyholders to a new insurer.

Maybe that will work out fine. The new insurer’s financial strength and customer service might be just as good, or better, than you had before. The terms of your current policy will stay the same.

But you don’t know how the new company will view the premiums that you pay.

As the industry consolidates, “there’s going to be pressure to increase prices,” says David Larson of the Larson Long Term Care Group in Bothell, Wash. After the sale, your premiums might rise. Or they might rise before the sale so the new insurer won’t have to take the blame.

The LTC business improved last year, from what had been disappointing levels. Sales of employee-group LTC policies leaped 56 percent, according to LIMRA International in Hartford, Conn.

But interest in LTC coverage remains relatively low. In group plans, an average of only 6 percent of employees join, says LIMRA senior analyst Patricia Ash.

If your own LTC policy is sold, your first concern should be your new insurer’s safety-and-soundness ratings. The company should carry top marks from at least three of the five major rating services, says Joseph Belth, insurance professor emeritus at Indiana University and publisher of the newsletter, The Insurance Forum.

You should also ask what happens if the new insurer fails. When a policy is transferred without your permission, the old insurer would still remain responsible, Belth says.

Finally, ask about the new company’s history of raising premiums. Insurers can’t raise your price individually. But they can raise it collectively on all the policies sold in your state.

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