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As of October 1, 2003, Illinois law prohibits insurers from using a scoring model or other process using credit,
on new or existing business, if such model or other process using credit contains any of the following factors:
income, gender, address, ethnic group, religion, marital status, or nationality of the consumer.
What kind of credit information are insurance companies using?
Although some insurance companies still look at your actual credit report, most companies now use a “credit
score” or an “insurance score.” A score is a snapshot of your credit at one point in time.
Insurance companies and entities that have developed credit scoring models use several factors to determine
credit scores. Each factor is assigned a weighted number that, when applied to your specific credit information
and added together, equals your three-digit credit score ranging from 0-999, depending on the insurance
company and the credit scoring model used. Generally, the higher the number, the more financially responsible
the consumer.
Following is a list of the more common credit factors used in determining credit scores:
• Major negative items - bankruptcy, collections, foreclosures, liens, charge-offs, etc.
• Past payment history - number and frequency of late payments; days elapsed between due date and late
payment date.
• Length of credit history - amount of time you've been in the credit system.
• Home ownership - whether you own or rent.
• Inquiries for credit - number of times you've recently applied for new accounts, including mortgage
loans, utility accounts, credit card accounts, etc.
• Number of credit lines open - number of major credit cards, department store credit cards, etc. that
you've actually opened.
• Type of credit in use - major credit cards, store credit cards, finance company loans, etc.
• Outstanding debt - how much you owe compared to how much credit is available to you.
How do insurance companies use credit information?
Companies use credit in two ways, to underwrite and rate your insurance policy.
Underwriting
Underwriting is the process where an insurer gathers information about you and decides whether or not they
will insure you. Illinois law allows an insurer to deny you a new policy, or to cancel or nonrenew your existing
policy based solely on information obtained from your credit report, as long as the insurer offers coverage
through an affiliate company, even if the coverages, terms, or conditions offered in the affiliate are different.
Rating