Sad when the frugal have to pay more

Published 10:36 pm Sunday, April 25, 2010

Jean Bochan would be the first to admit that she’s a little different.

The Snohomish-area woman still dries her wash on a clothesline “like my grandma.”

She still uses a rotary-dial phone, which you don’t see these days — except in an antique store. She owns her own home and has no debt. When she needs something, she gets a bank check or pays cash.

She’s frugal. And that’s one reason why her home looks a little odd.

“It has half a new roof,” Bochan acknowledged. “Last year we did the front and this year we’re going to do the back when we have the money.”

Bochan was telling me all this over her perfectly functional rotary phone last week because she was pretty steamed and she wanted me to answer the question, “Am I wrong?”

What had her going was a bill from Safeco Insurance for her homeowners policy; the premium had taken a jump. It wasn’t because Safeco’s costs had suddenly gone up or because Bochan had recently made a lot of claims. It wasn’t because Bochan can’t be trusted to pay on time. She has bought various kinds of insurance through the same company for the last 45 years and she pays her bills.

Bochan needs to pay more, Safeco said in a letter, because of her poor credit history.

Her credit score is a paltry 62.

For those who don’t know, ratings agencies issue credit scores for people that assess their history with credit, how long they’ve used it and whether they pay their bills on time.

The scores range from 300 to 850, with 500 to 579 considered bad, 620 to 679 OK, and 720 to 799 great. The ratings are important if you want to buy a home or a car because all lenders use them to see if you’re an acceptable credit risk.

Everyone knows that, but you may be surprised to hear that the credit scores are being used increasingly by the insurance industry to determine whether to give you a policy at all and to set your rates.

It’s popular for auto insurance and is becoming increasingly popular for homeowners insurance as well. The theory is that people who are irresponsible with credit are generally irresponsible and aren’t a good insurance risk.

The whole idea infuriates Bochan, who views it as outright discrimination.

“I don’t owe anybody anything, except for my property taxes,” she said, “I’m being discriminated against and charged more because I don’t use credit cards.”

Bochan said she once had a department store card and a gas card but that that was probably 25 years ago. Her credit rating of 62 doesn’t mean she has a bad credit history; it just means she has virtually no credit history at all.

Her letter from Safeco suggested she could start building that history, but Bochan, who is 71, sees no reason to change her ways now.

“I hardly ever leave my place,” she said. “I don’t go out to eat. I don’t need a credit card. I guess we’re just kind of old-fashioned.

“I know the nation does run on credit. I think credit is important. Maybe I’m wrong, but I’m sticking with the issue. I don’t think you should be discriminated against because you don’t use credit.”

For the record, Jean, you’re not wrong.

People exactly like you built this country. They did their jobs and paid their bills. When they needed something, they saved up for it. Their homes and maybe their cars were usually the only thing they bought over a period of time.

But we live in a very different country these days. One that uses probability equations and computers to rate people rather than talking to other people about them to see if you have a good name in the community.

I can’t help but think that it was computers and statistical analysts who told us just a few years ago that it was a good idea to lend billions in mortgage loans to people who couldn’t pay back the money, including many who had no job.

These folks couldn’t get a job, but they could fill in all the blanks in the computer form. What were eventually referred to as “liar loans” were sliced and diced with other mortgages and turned into financial instruments that other computers rated as highly safe.

When the computers grossly underestimated the number of people who stopped paying their mortgages, the bonds went bad and the world’s economy nearly collapsed, throwing us into the recession we’re still dealing with.

No, Jean, you’re not wrong.

It’s just a shame that somewhere in that computer there isn’t a space for people like you who don’t want to bother with credit cards but who have no problem paying their bills on time.

Mike Benbow: 425-339-3459; benbow@heraldnet.com.