Will my credit rating change my insurance rates?

What does Insurance and Credit mean for my insurance rate? We were recently asked this question by one of our  clients, and thought we 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. Some people have absolutely no idea that it’s used in their rates 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.

Its important to remember that 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 you get a quote.

When we say “pull” what we 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 also 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 and occasionally over the years as you continue to renew your policy.

This means that if your credit score increases (or decreases) your insurance company typically wont automatically know about it. But may over time as changes occur.

So, to our customers question of whether or not his increased credit score will lower his rates, the answer is not automatically, but can over time depending on which company that you insure with.

If you’d like to get a better handle on your credit rating, it could be helpful to setup credit monitoring. We hope this was helpful! As always, leave us comment below if you have any questions.

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