Will My Credit Score Affect an Insurance Quote?

Will my credit score affect an insurance quote?

At Mathenia Insurance Group we like to educate our customers about what affects insurance rates. It is important for us to make sure customers understand the quoting process because we would love to build trust with our clients. One of the questions we ran across includes customer’s credit score.

A credit score is one of the many things that define your insurance premium. Often people do not appreciate the fact that insurance uses their score to figure out the insurance premium. Also, a lot of people have no idea that their credit score affects insurance costs. If you have never heard about the correlation between credit score and insurance underwriting, trust me, you are not alone.

Insurance score and its effect on the rates

A credit score helps to identify your insurance score. Those scores were introduced in the early 1990s by insurance companies as an additional tool to determine the associated risks with ensuring a specific profile. Risks generally include the likelihood of an accident or a claim for an insured individual.

When you apply for a loan, your credit score helps to determine for which interest rate you qualify. The pattern related to the insurance rates is pretty much similar. Higher credit score will help to lower your insurance premium when a low score can increase your rate.

There is no universal methodology for each insurance carrier. Each company uses their formulas to determine risks for each profile. There is a chance that a quote from one company may be less affected by credit score, than a quote from another company. If you feel like your credit score affects your insurance premium too much it might be a good time to shop for a lower rate.

Insurance score and credit score are two completely different calculations that use available data differently, or may not use some part of it at all. Honestly, customers do not have much power over how insurance companies determine their rate, but what they can do, is to work on their credit score.

Does shopping for insurance lowers my credit score?

There are two different credit inquiries: soft and hard. Soft pull gives a company access to your credit report so that they can review the information. For example, applications such as Credit Karma allows you to monitor your score without lowering it. A soft inquiry is exactly what insurance companies do. A hard pull on the other side may reduce your score by a couple of points. Hard pull usually occurs when you are applying for a loan. For example, mortgage application, car loan application, or a new credit card application would be qualified as hard pulls.

Do insurance companies constantly monitor my credit score?

A simple answer would be no. Insurance carriers do not re-score your profile. The only time when an insurance company checks your credit score happens when you first get o quote or purchase insurance from them.

Since the insurance carriers do not automatically update your score, you are the only one who is in control of that situation. Getting a higher credit score would not lower your insurance quote automatically. Also, insignificant changes probably would not change your premium. But moving to a more upper tier, for example, to good from fair may decrease your insurance for up to 15% depending on the carrier.

What is great about the company not rechecking your score automatically is that in a case when your score goes down, it should not raise your insurance premium. On the other hand, if you’re working on improving your credit score and were able to jump a couple of tiers higher, it might be an excellent opportunity for you to get some additional benefits from the increased credit score.

If you think that your credit score has significantly improved since you got your policy, you might want to consult with your agent. Sometimes, what agent can do is to contact the insurance carrier and ask them to re-score your profile. An insurance carrier can make another soft inquiry and see if there is a chance to lower your premium.

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