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Your credit history matters when securing auto insurance, home insurance, and many other types of insurance. It has since the early 1990's here in Arizona. Every so often legislation goes through the state which tries to eliminate the use of credit history when underwriting insurance policies. The legislation continues to FAIL which recently was the case in the Arizona 2013 Legislative Session. SB1395 would have prohibited Insurers from using credit history to classify or rate insurance policies.  

I won't get into the Pros and Cons of using credit scoring for insurance underwriting in this post. There are passionate arguments on both sides and I don't feel like regurgitating these arguments which have been going on for more than 20 years.

The purpose of this post is to let you know the 6 types of credit history the insurance companies can't use against you when determining your auto insurance or home insurance rates. Note: this applies to the State of Arizona. Other states may or may not consider these credit history types or permit the use of credit at all when buying insurance.

The details of what I will share can be found under the Arizona Revised Statute 20-2110 Reasons for adverse underwriting decisions.

6 Types of Credit History which CAN'T be used Against You

ARS 20-2110 F. An insurer shall not use the following types of credit history to calculate an insurance score to determine property or casualty premiums for insurance transactions that are subject to this article and shall not knowingly use an insurance score developed by a third party if the score is calculated using any of the following types of credit history.

  1. The absence of credit history. (The insurer must treat this consumer as having neutral credit information.)
  2. Credit history or insurance score based on collection accounts with a medical industry code. (Make sure these are coded correctly. It's your responsibility.)
  3. A bankruptcy or lien satisfaction that is more than 7 years old.
  4. A consumer's use of a particular type of credit card, charge card, or debit card.
  5. A consumer's total available line of credit, except an insurer may consider the total amount of outstanding debt in relation to the total available line of credit.
  6. An insurance score calculated using the income, gender, address, zip code, ethnic group, religion, marital status or nationality of the consumer as a factor. (This doesn't prevent the insurer from using zip code, address, gender, and marital status information for underwriting purposes.)

My recommendation is to review your credit score and history each year to make sure you are maximizing your score. Fix any discrepancies promptly. If you have medical collection accounts make sure they are coded correctly on your report. Taking an active role in your credit history can save you thousands of dollars on your auto and home insurance over your lifetime so don't ignore it.

Also, every insurance carrier uses your credit score differently. They have developed their own methodology for these scores so be sure to check with an independent insurance agent, like me, to ensure you're getting the best policy at the best value for your needs. If you need help correcting your credit history call me. I know several reputable, local businesses which can assist you with repairing your credit history.

Author Richard Morris

<pRichard Morris, an independent insurance agent in Chandler, Arizona, has been serving and helping Arizona families with all their insurance needs for over 23 years. Visit his website at http://www.southwestpremierinsuranceagency.com to see all the ways he can help you with your insurance needs or call the office at (480) 336-2707 or toll free at (888) 907-9349. Connect with Rich on Google+ and Twitter. </p
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