Do Insurance Quotes Affect Credit Score?
Insurance Q&A: “Do insurance quotes affect credit score?”
The current economic environment, along with the daily reminders we get about the importance of our credit score, has us all wondering if shopping for insurance rates will affect our credit score, and subsequently cost us money in the long run.
The good news is shopping for insurance has absolutely no effect on your credit score! However, there is some information you should be aware of.
Insurance companies have begun to use your “credit” as a means to determine how much to charge you for insurance coverage.
Of course, there are still many companies who will provide insurance without using credit to determine the rate, so don’t fret.
But studies reveal that there is a positive correlation between your credit score and your propensity to file an insurance claim (why do insurance companies need social security numbers).
The main thing you need to understand is that insurance companies don’t use the FICO score you may be used to seeing or hearing about on television.
The proper term is “insurance score,” which is calculated similarly, but uses a slightly different formula. The insurance score registers as a “soft hit” on your credit report, meaning it does not affect your credit score in an adverse manner.
Ultimately, a company providing you with insurance coverage is not the same as a bank lending you money.
The FICO score was originally created to determine the statistical odds you would repay borrowed money or credit extended to you.
Therefore, it doesn’t make sense for the credit reporting agencies to lower your credit score (and deny you credit or raise your interest rate) for attempting to purchase insurance.
Finally, keep in mind that most states require us to have at least a minimum liability limit insurance policy to operate a car.
It’s the LAW and a NECESSITY to make certain that if you injure another person while driving, you have a means to pay for it.
Conversely, things like owning a car or buying a house are a choice, if not a privilege, and are thus subject to credit checks.
Related Topics:
- Errors on your Credit Report May Raise Your Insurance Premium
- How to Get Cheap Car Insurance
- Why Is Insurance So Expensive?
- Why Is Insurance Higher For a Person Under 25?
Posted Under: Insurance Help
