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Will Getting an Insurance Quote Hurt my Credit Score

If there's one rule when it comes to insurance, it's that you should always shop. Prices for your home and auto insurance can be dramatically different across a set of 35 carriers. Premiums vary so widely because each company has different underwriting standards, risk appetite, and rating factors. One such important factor that many insurance carriers use to price your risk is your Insurance Score. The insurance score is similar to the credit score, but typically takes into account additional information:

Insurance Scores vs. Credit Scores

The credit score most people know is the FICO credit score and predicts your probability of repaying a loan. Your insurance score is weighted differently than your FICO score. An insurance score predicts the likelihood of you becoming involved in a future accident or insurance claim, as well as your ability to make your insurance payments on time. Each insurance company uses the score differently to adjust your insurance rates.

Insurance companies pull your credit using a "Soft Hit," which does not affect your credit score. When you apply for a loan, a bank or lender will use a "Hard Hit" on your credit, causing a temporary drop in your credit score.

  • Soft Hit: this occurs when a person or company checks your credit report as a background check, like when you check your credit score or a mortgage lender pre-approves you for a loan. Or when an insurance company wants to send an insurance quote.
     
  • Hard Hit: this occurs when a prospective lender checks your credit report to make a lending decision. A hard hit can slightly lower your credit score and will typically stay on your credit report for two years. One or two of these does not have a significant effect over time, but if you start to have three or more stack up, they can keep your credit score lowered for the two-year duration until they roll-off.

How Insurance Scores Affect Your Rates

It's worth noting that not all insurance companies change their prices based on the insurance scores. For most carriers, as you would expect, the higher your insurance score, the better your rates.

Favorable insurance factors might include things like:

  • No claims filed in the last five years
  • Long established credit history
  • No payments or past due accounts
  • Low use of available credit
  • Numerous open accounts in good standing

Unfavorable insurance factors might include things like:

  • Claims filed in the last five years
  • Collection accounts
  • Numerous past-due payments
  • High usage of available credit
  • Many recent applications for credit

In summary, you don't need to worry about an insurance quote affecting your credit score. Keep in mind, your insurance score will influence your insurance rate. If you recently brought your credit score up a few notches, it's worth checking your new insurance rates. It's easy to get multiple insurance quotes without affecting your credit score.

At your service,
Young Alfred