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Do Insurance Companies Check Credit?

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Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency...

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Reviewed byJoel Ohman
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UPDATED: Mar 13, 2020

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credit check

Doesn’t it seem like your credit score affects almost every aspect of your life nowadays? If you feel this way, you’re not crazy.

More and more insurance companies are looking at certain aspects of your financial history when deciding how much you charge for your insurance premium.

How Do Insurance Companies Get My Credit Score?

Your insurer or independent agent likely asked you for your social security number when filling out your application for coverage. This is the best way to get access to your financial history.

Additionally, unbeknown to the average insurance consumer, you financial history can be accessed by simply using your name and current address, as long as you have been there for at least one year (in most cases).

What Do They Do With My Information?

Insurers do not use your actual FICO score as a rating factor in determining your insurance premium. Insurers could care less how many credit cards you have or what the balances are. Rather, they are only interested in your payment history, which they can obtain via your insurance score of financial responsibility scores.

Several controversial studies have concluded that there is a correlation between your financial responsibility level and your propensity to file an insurance claim.

Individuals who file claims have to pay more for their insurance and vice versa…bottom line.

Whether you are a 16-year old driver, have several tickets or accidents, or a poor financial history, you can expect your premium to be higher than an individual with none or fewer of those characteristics.

Does Every Insurance Company Check Credit?

Not every insurance company uses your financial history to determine your insurance premium. In fact, some insurers are specifically “going after” drivers and homeowners with poorer payment histories. You can expect to pay more for those insurance policies though…

There are also some states that do not allow insurance companies to use financial history as a rating factor. California is an example of one such state. No matter what your credit history, your premium will be determined using more conventional rating factors such as age, sex and the type of vehicle you drive (how are car insurance rates determined?).

Am I Out of Luck If I Have Bad Credit?

Not necessarily. There are several discounts (good student, good driver) available on today’s insurance policies. So, even if you have a poor credit history, you may qualify for certain discounts which may effectively even out your premium.

Tip: How to get cheap car insurance.

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