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Collins’ plan would ban car insurance from looking at credit scores

Collins' plan would ban car insurance from looking at credit scoresYour credit score determines a lot more than whether you qualify for a loan. What many consumers don’t know is that it plays a major role in determining how much you pay for car insurance.

Consumer Reports published a study of insurance rates in its September 2015 issue, and its research shows that in many cases, a driver’s credit score is an even more important factor than his or her driving record. Unbelievably, in Illinois, a person with a clean driving record but poor credit pays, on average, 51 percent more for car insurance than a person with a DUI conviction but excellent credit.

The use of credit scores in setting auto insurance rates doesn’t just have concerning implications for public safety, according to Senator Jacqueline Y. Collins, who has introduced legislation banning the practice.

“Auto insurance companies’ use of credit scores also exacerbates existing racial and socioeconomic inequalities, perpetuating a cycle of unemployment, stagnant economic growth and poor credit in low-income, minority communities,” Collins said. “Consumers living in predominantly Black or Latino communities tend to have lower credit scores, often as a result of medical debt, loss of a home during the recession or even errors, which appear in 20 percent of credit reports and are extremely difficult to correct.”

“A credit score is a financial tool designed to predict your ability to repay a debt,” Collins said. “It’s not designed to predict your driving skills, responsible conduct behind the wheel or proclivity toward risky behaviors. Insurance companies are using it for a purpose for which it was never intended, with disastrous results for Illinois consumers – particularly consumers of color.”

California, Massachusetts and Hawaii have already banned credit-based insurance pricing. Collins hopes to secure passage of Senate Bill 2208 so Illinois can join them.

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