Does Getting Insurance Quotes Affect Credit?

When you get a quote for car insurance, it’s true that the insurance company may check your credit score to weigh the risks of insuring you. But there are different types of credit inquiries, and the type of inquiry that the insurance company conducts does not have the same impact on your credit score as having your credit score pulled by a lender.

Do Insurance Quotes Affect My Credit?

No. Car insurance companies initiate a soft inquiry when checking your credit — a type of inquiry that doesn’t affect your credit score. Car insurers may choose to check your credit because industry studies, including one by the Federal Trade Commission, indicate that consumer credit scores can help predict the possibility of someone having an accident or filing an insurance claim in the future.

Soft Inquiry vs. Hard Inquiry

When someone checks your credit, a hard inquiry or a soft inquiry is made, the latter of which is the case with car insurers. Other times a soft inquiry occurs is when you check your own credit or when a creditor or lender wants to preapprove you for a financing offer that you did not request.

In all of these cases, you aren’t actively seeking credit, so a soft inquiry does not affect your credit score.

A hard inquiry happens as a result of you filling out a credit application. The lender will initiate a hard inquiry to review your credit and determine if you can be approved for the credit you are seeking. Hard inquiries can affect your credit score.

What Credit Scores Do Insurers Use?

The credit score that insurers consider isn’t like the VantageScore or FICO score that lenders use. Instead, insurers review the information in your credit report to calculate a credit-based insurance score. Here are some of the factors from your credit report that  insurers may evaluate in order to give you a quote:

  • Payment history
  • How much of your credit limits you’re currently utilizing
  • How long it has been since you applied for a loan or credit card
  • The amount of overall debt you have
  • The number of accounts you have
  • The types of accounts you have
  • The age of your credit
  • Any collections, foreclosures or bankruptcies noted

What Effect Does My Credit Score Have on My Premium?

Not only do insurers check your credit score to gauge the risk of offering you an insurance policy, but they also use it to determine your premium. In general, if you have a high credit-based insurance score, your premiums will be lower. However, insurers also consider other factors in addition to your credit score, such as your driving record and claims history.

How to Monitor Changes to Your Credit

To avoid surprises when you apply for an insurance quote, it’s important to know what’s going on with your credit. One way to accomplish this goal is to use a product such as ScoreSense. With it, you’ll get ongoing access to your credit report from each of the three credit bureaus: Equifax, Experian and TransUnion, as well as your three credit scores.

In addition, you’ll receive daily monitoring, monthly updates and credit alerts to help you know about any changes in your credit. If you’re not already using a credit monitoring product, why not get started today?  

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