A bill passed Wednesday in the Senate would restrict insurance companies' use of a customer's credit rating in determining insurance rates or whether to insure the customer.
Senate Bill 13 passed 19-0 and moves to the House.
Companies that issue personal policies such as auto insurance and renter's insurance use a secret formula to evaluate a client's credit history. Known as "credit scoring," the practice is routine throughout the nation, said bill co-sponsor Sen. Kim Elton, a Juneau Democrat.
The bill requires companies to disclose the formula to the state Division of Insurance, and makes it mandatory for insurers to use other factors in determining whether to issue a policy and how much that policy will cost. For example, an auto insurer still may use driving history to determine rates, but can't base the price of the policy solely on the driver's credit score.
The bill also prohibits insurers from taking into account a number of different credit-rating points.
Among those are the absence of a credit history, the type of credit card a person holds, the age at which credit is established