Updated August 3, 2018 . AmFam Team
Does getting an insurance quote hurt your credit score? The answer is no — no matter how many quotes you get! We’ll explain why they don’t hurt your credit score and why insurance companies check your credit in the first place.
Nobody wants to be stuck with an insurance plan that costs them too much and covers them too little. But maybe you’ve heard the myth that getting an insurance quote will hurt your credit, leaving you hesitant to shop around for the right coverage. We’ve got some good news — no matter how many insurance quotes you get, your credit score is safe. Here’s why you should be worry-free when you’re shopping for insurance.
It is true that insurance companies check your credit score when giving you a quote. However, what they’re doing is called a ‘soft pull’ — a type of inquiry that won’t affect your credit score. You’ll be able to see these inquiries on your personal credit reports, but that’s it. These inquiries aren’t visible to lenders and have zero effect on your credit score.
Insurance companies check your credit score in order to gauge the risk they’ll take to insure you. Studies have indicated that those with lower credit scores are likely to file more claims or have more expensive insurance claims, while those with higher credit scores are less likely to do so.
If you have a low credit score, you’ll often pay a higher premium than if you had a high credit score. Having a higher credit score can pay off in a number of ways besides lower insurance premiums, though. And getting your credit score back on track is as simple as exercising good personal finance habits.
But your credit score isn’t the only thing that affects your insurance premium — depending on the type of insurance you’re looking for, your driving history, geography, property value and claim history can all affect how much you’ll pay per month.
Insurance companies commonly use credit-based insurance scoring to effectively predict the likelihood of a customer’s future insurance claims. Different from your credit score, your credit-based insurance score is a three-digit number that’s calculated by using information from your credit report. Things like the total amount owed on all accounts on your credit report, the average age of those accounts and more are taken into account.
But just like a regular credit report, when insurance companies request your credit-based insurance score, it won’t affect your credit score.
Your insurance coverage shouldn’t be all about the price, though. When you’re getting insurance quotes, make sure to look carefully at what the policy covers. You don’t want to sacrifice adequate coverage just to pay less. Get in touch with an American Family Insurance agent (Opens in a new tab) to see how you can get all the coverage and peace of mind you need for a fair and competitive rate.