Will my credit rating change my insurance rates?
I was recently asked ‘whether or not my credit rating will change my insurance rates’ by one of our clients. There are a lot of things that go into homeowners and auto insurance rates, one of them being credit. I’ve heard a lot of complaints from people who don’t like the fact that insurance companies use credit in their underwriting.
Some people have absolutely no idea that it’s used in the rate at all.
At the end of the day, there’s not much we can do about it though. Insurance companies have been using credit in their rates for decades, and that’s not likely to change.
By the way, insurance companies don’t pull your credit like a mortgage company or credit card company does. There is no negative impact on your credit as a result of an insurance company looking at it.
When I say “pull” what I mean is that the insurance company is doing what’s called a soft inquiry, which is not the same thing as having your credit pulled (hard inquiry).
When does credit play a role in insurance rates?
It’s important to understand that insurance companies don’t continuously check or monitor your credit. Usually, they only check it when you first get a quote and/or sign up with them in the very beginning.
This means that if your credit score increases (or decreases) your insurance company does not automatically know about it.
To my customer’s question of whether or not increased credit score will lower rates, the answer is not automatic.
What’s done on our side as the agent, is to contact the insurance carrier and ask them to do a “re-score”. This is when the company can re-run the person’s credit (soft inquiry) to see if there is any positive bearing on the rate. This isn’t something that the insurance company is going to let the agency do every single year, so it’s not worth asking, unless there has been a significant change in your credit score. Only you as the customer would know if that was the case.
If you’d like to get a better handle on your credit rating, it could be helpful to set up credit monitoring. We hope this was helpful! As always, leave us a comment below if you have any questions.