“How does credit score affect insurance rates?” is a question we hear from G&G clients. Many people are surprised to learn that their credit history can be one of the factors an insurance company considers when determining their auto or homeowners insurance rates.
If you’re wondering whether improving your credit could lower your insurance premium, the answer depends on your insurance company, state, and individual policy. Here’s what you should know about credit and insurance rates.
Does Your Credit Score Affect Insurance Rates?
In many states, insurance companies may use information from your credit history to calculate a credit-based insurance score. This score is one of several factors that may be considered when determining your insurance premium.
Generally, a stronger credit profile may be associated with lower insurance rates, while a weaker credit profile may result in higher rates. However, credit is only one factor insurers may consider. Other factors can include your driving history, claims history, location, vehicle, home characteristics, coverage limits, and deductible.
Insurance companies use these factors to help evaluate the potential risk of insuring a customer.
If you live in Arkansas and are specifically wondering how credit can affect your car insurance, check out our guide on Does My Credit Score Affect Car Insurance in Arkansas? for more information about credit-based insurance scores and auto insurance rates in the state.
Does an Insurance Company Pull Your Credit?
When an insurance company checks your credit for insurance purposes, it is generally different from the type of credit inquiry used when applying for a mortgage, credit card, or other loan.
Insurance-related credit inquiries are typically soft inquiries, which do not have the same effect on your credit score as hard inquiries.
In other words, getting an insurance quote generally does not cause the type of credit-score impact associated with applying for new credit.
When Does Credit Play a Role in Insurance Rates?
Insurance companies generally don’t continuously monitor your credit after you purchase a policy. Instead, credit information may be reviewed when you initially apply for coverage or when the insurance company allows a credit-based insurance score to be updated.
This is important if your credit has improved significantly since you originally purchased your policy.
For example, you may have paid down debt, corrected errors on your credit report, or otherwise improved your credit profile. Your insurance company may not automatically adjust your premium simply because your credit has improved.
Can Improving Your Credit Lower Your Insurance Rate?
Potentially—but it isn’t automatic.
If your credit profile has improved significantly, you can ask your independent insurance agent whether your insurance company offers a re-score or similar process.
A re-score allows the carrier to obtain updated credit information and determine whether your updated insurance score could result in a different rate.
Whether a re-score is available, how often it can be requested, and how it affects your premium will depend on the insurance company and applicable state regulations.
That’s why it’s worth talking with your insurance agent if you’ve experienced a significant improvement in your credit.
How Often Can Your Credit Be Re-Scored?
There isn’t a universal rule that allows an insurance agency to request a new credit-based insurance score whenever a customer’s credit changes.
Insurance companies may have specific requirements or limits on how frequently a re-score can be requested. Because of this, a re-score generally makes the most sense when there has been a meaningful change in your credit profile.
If you’re unsure whether your credit has improved enough to make a difference, your insurance agent can help you determine whether contacting your carrier is worthwhile.
How Can You Keep Track of Your Credit?
If you’re working to improve your credit, regularly reviewing your credit reports can help you keep track of changes and identify potential errors.
Credit monitoring services can also notify you of certain changes to your credit profile. However, monitoring your credit doesn’t guarantee that your insurance premium will decrease. Your insurance company considers multiple factors when determining your rate.
Talk to G&G Insurance
Your credit is just one of many factors that can influence your auto insurance and homeowners insurance rates. If your credit has improved significantly since you purchased your policy, it may be worth asking your independent insurance agent whether your carrier offers a re-score.
At G&G Insurance, we can help you understand the factors affecting your insurance premium and determine whether there may be opportunities to improve your coverage or rate.
Have questions about how credit affects your insurance? Contact G&G Insurance today.