I added a home equity loan early this year and my FICO score at that point exceeded 800. Now it's auto insurance renewal time (my carrier for 14 years has been Pemco -- a major insurer in Washington State) and I was notified with the renewal that my insurance score is 724 and I did not get the highest level of discount. In the three years that Pemco has used insurance scoring, this is the first time that I have not received the highest discount level. Pemco says that it gives a 38 percent discount for scores at 800 and above; 30 percent for 750 - 799; 25 percent for 700 - 724; 19 percent for 650 - 699; 13 percent for 600 - 649; and 9 percent for 550 - 599.

After having scores of 800+ until now, I never thought that I'd qualify for a free Equifax report but I did request one and was shocked to find that my home equity loan with First Tennessee Bank is listed as revolving. In going over my loan papers, I see that the bank does in fact consider such loans as revolving, rather than installment.

Some other observations:

1) the four reason codes I received were a) high B/L ratio; b) favorable length of time of credit history; c) too many new accounts; d) favorable number of installment loan accounts. Very strange -- I thought that the four reasons were supposed to all be negative, yet two are positive. If they're going to list positive reasons, strange that my lack of even one derogatory bit of info is not there, since that's supposed to be 35 percent of what goes into a FICO score.

2) I don't believe Pemco that they are giving a 9 percent discount to someone with a 550 FICO. I bet that 95 percent of the people would have at least that score and they aren't going to suddenly give discounts ranging from 9 to 38 percent to most of their customers.

3) of course insurance scores might be a little different than the FICO, but it seems to have a close relation. I'm being penalized at least 75 points for having a home equity loan because it looks like I have 30K in credit card debt, when in fact I have less than $500, out of $17,000 available or 3 percent. With my loan classified as revolving I am utilizing 64 percent of what's available to me and that caused a huge drop in my FICO.

4) FICO tells us that they continuously update their software to reflect real consumer behavior. If that's true, with so many home equity loans out there these days FICO should be updating the models to lower the penalty for having revolving debt. The better solution is to classify these loans as installment debt or just like mortgages. I will stipulate that I'm no expert, but one reason mortgages and home equity loans have lower interest rates is because the risk to the lender is less. FICO also tells us that consumer finance accounts are more risky. The same cannot be said of home equity loans, and I bet that nobody gets penalized 75 points for having a loan from ITT!

5) I have never heard of a lender or insurer requiring 800 for its best rates. What is the highest anyone has ever heard? I think I may have heard of a few loans requiring 750, but isn't 720 generally going to give you the best rates at almost anywhere? This has really hurt me and I started with a score of 800. For those starting with a 700, you'll see more rejections for credit cards, mortgages, insurance, and many will see their interest rates go up. Consider the ramifications before you get a home equity line -- you might not be aware of the financial downside.

6) I've always had a good relationship with Pemco so am sorry to leave them after 14 years with no accidents, but have found some better deals. Insurance scoring in Washington State was strictly regulated earlier this year in what was called the most restrictive laws in the nation. Washington will not allow inquiries, medical collections, the use of a particular type of credit card, or the absence of credit history to affect premiums. That must mean that there is a custom insurance score from FICO for each state. I'm going to contact my insurance commissioner.

7) For the average consumer, getting the credit report without the score is not much of a help. Most people would not seize on the fact that the home equity loan is causing the problem since they associate it with their mortgage. Consumers need to know exactly which accounts are causing lower scores.