Does my credit score impact my insurance rate?
Ahh… The credit score question. This can be a big deterrent for folks looking to get an insurance quote. Unfortunately, the answer is yes.
However, there is a huge difference between an insurance company pulling your credit score and a mortgage company pulling it. Insurance companies have been using credit scores in their rates for years now. To put your mind at ease, when an insurance company “pulls” your credit score it's only a soft inquiry which has no affect on your credit score, unlike a hard inquiry would.
It is important to know when an insurance company will check your credit score. Generally speaking, they will check your score when you either start a quote with them or when you purchase the policy. They do not continuously check your score or monitor your credit score.
If your credit score increases or decreases, the insurance company will not know this. If your score has decreased and you are looking for it to impact your premium, some companies will re-score which is another soft inquiry. Keep in mind that this may not automatically impact your insurance but will at the next renewal. Not all companies will allow this to happen every year so we recommend only doing this when you know there will be a significant change in the score.
Here are some factors that play a role in your insurance score:
- ZIP code
- Age, make, and model of your vehicle
- Miles driven per year
- Driving history
- Age, or driving experience
- Accident or claims history
When your insurance score is combined with other factors, it helps the insurance company determine the likelihood of a claim.
What can you do to help improve your insurance score?
- Have accounts in good standing
- Build a long credit history
- Keep your credit utilization low
- Have no missed or late payments
Some companies will overlook some negative credit information that was directly affected by certain events such as divorce, serious illness, death of relative or other circumstances. It is important that you know and understand your credit score before calling your insurance agent. Especially if you know it’s a below average score. This way, you can be upfront with your agent and explain any discrepancies or extenuating circumstances which apply to you.
Calling your agent to discuss your situation is a great way to start the process. As they say at Planet Fitness… “It’s a judge free zone.” We are here to help you, educate you and work with you to make sure you’re insured properly and the price meets your needs.