Accordingly with the federal law each of us has a right every 12 months to obtain a free copy of our credit report. Doing that we can ensure ourselves that there are no suspicious transactions or credit cards which we have never applied for.
It is worth to follow up on; in state of Illinois each of the insurance companies in which we are trying to purchase coverage for our home, auto or just to renew it, they have a right to check our credit history.

Reasearch done by insurance companies’ show strong relationship between financial stability of a customer and a claim. Customers, who are more financially responsible, have fewer accidents; as for insurance company they should pay lower premiums.  On the other hand customers who are less financially responsible have higher number of accidents; and in consequence should pay higher premiums.

Let us start from explaining what a Credit Scoring really is!
Credit Score is a calculation of our credit at one point in time.
The credit information is put through a mathematical formula and summarizes our credit into a three-digit number.
Generally, the higher the number, the more financially responsible is the consumer.

How is Credit Scoring Used?
If your insurance company relies on credit scoring, they may use it in two ways:
Underwriting — deciding whether to issue you a new policy or to renew your existing policy.
Rating — deciding what price to charge you for your insurance by placing you into a specific rating “tier” or level.
Some insurers use credit information along with other more traditional rating factors, such as motor vehicle records and claims history. Other insurers may use credit alone to determine your rate.

What affects a Credit Score?
There are several factors that determine credit scores. Here are of the most common factors:

• Major negative items — Bankruptcy, collections, foreclosures, liens, charge-offs, etc.
• Past payment history — Number and frequency of late payments.
• Length of credit history — Amount of time you’ve been in the credit system.
• Homeownership — 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 open credit lines — 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.

Knowing your Credit History
There is a good chance your current or prospective insurance company is looking at your credit. Therefore, it is a good idea to review your credit history to make sure it’s accurate. There are three companies from which you can request your credit history:
Equifax (www.equifax.com )
Experian (www.experian.com)
Trans Union (www.transunion.com).
You can also contact the Federal Trade Commission for consumer brochures on credit at www.ftc.gov or www.naic.org

The Fair Credit Reporting Act requires an insurance company to tell you if they have taken an “adverse action” against you, in whole or in part, because of your credit report information. If your company tells you that you have been adversely affected, they must also tell you the name of the national credit bureau that supplied the information so that you can get a free copy of your credit report and correct any errors.

Numerous numbers of insurance companies offer coverage in case of identity theft. We can add this coverage to your home or an auto policy, with an additional premium of around $25 to $50 annually.
This insurance will cover following expenses, in accordance to rebuilding your credit:

• notary expenses
• compensation for loss of earning if we have to take a day off from work, so we could make an explanation in the court or on a police station in regards to our identity theft
• compensation for attorney fee, who will defend us if a suit is brought in the identity theft case or will bring on a case to remove criminal or civil ruling from our record.

The New Year is already here, take charge of your credit history!
If your insurance company is using your credit score to evaluate your rates, you can take steps to improve your premiums:

• Get a copy of your credit report and correct any errors.
  Notify your insurance agent and company of any errors.
• Improve your credit history if you’ve had past credit problems.