I was recently asked this question by one of our personal insurance clients, and thought I would share the answer here for our readers.
There are a lot of things that go into homeowners and auto insurance rates, one of them being credit. I’ve heard a lot of complaints from people who don’t like the fact that insurance companies use credit in their underwriting.
Some people have absolutely no idea that it’s used in the rate at all.
At the end of the day, there’s not much we can do about it though. Insurance companies have been using credit in their rates for decades, and that’s not likely to change.
Do insurance companies pull your credit report?
By the way, insurance companies don’t pull your credit like a mortgage company or credit card company does. There is no negative impact on your credit as a result of an insurance company looking at it.
When I say “pull” what I mean is that the insurance company is doing what’s called a soft inquiry, which is not the same thing as having your credit pulled (hard inquiry).
When does credit play a role in insurance rates?
It’s important to understand that insurance companies don’t continuously check or monitor your credit. Usually, they only check it when you first get a quote and/or sign up with them in the very beginning.
This means that if your credit score increases (or decreases) over time or after the first soft inquiry, your insurance company does not automatically know about it.
Changes in credit scores
So, to my customer’s question of whether or not his increased credit score will lower his rates, the answer is not automatically.
What has to be done on our side, as the insurance agent, is contact the insurance carrier and ask them to do what’s commonly referred to as a “re-score”. This is when the insurance company can re-run the person’s credit (soft inquiry) to see if there is any positive bearing on the rate.
This isn’t something that the insurance company is going to let the agency do every single year, so it’s not worth asking unless there has been a significant change in your credit score, and only you as the customer would know if that was the case.
If you’d like to get a better handle on your credit rating, it could be helpful to setup credit monitoring. This isn’t something we offer, but we are happy to answer any questions you may have about how this works.
We hope this was helpful! Please leave us a comment below, on any experiences you may have with your credit score. As always, feel free to contact Kicker Insures Me Agency at (281) 487-9686 with any personal insurance inquiries, free quotes or claims, changes or policy questions. We are here to help with navigating your insurance needs.