Credit plays a major factor in the amount you will pay for auto or home insurance. There are many factors, but all things being equal a good rule of thumb is that there may be as much as 100% difference in pricing from the low end of the credit score to the high end.
Do insurers check credit on new customers?
Yes, most insurers run credit on all new customers, but it is important to know that they run an “insurance score” and not a “credit check.” Insurance companies run a “soft” check that has no impact on your future credit rating, unlike applying for a credit card or mortgage. You could get ten insurance quotes a day, every day and it would not have an adverse impact. Insurance companies use elements of credit and the scoring system is unique for each company and not directly tied to your FICO score. Typically, a high FICO score will correlate with a good insurance score, but they are not the same.
If you have poor credit and are on an older insurance policy it may be advantageous to stay on your current policy because it is not credit based.
Why do insurers check credit?
Insurers use credit because there has been a strong statistical correlation in credit and predicting future losses. Since insurance companies began using credit scoring many have increased its use because it is has proven to be a good tool for predicting risk.
Does credit affect all types of insurance?
Over the last five years the use of insurance scores has increased for property and casualty insurance (Auto, Home, Boats, etc). As far as we know credit scoring is not used in rating health and life insurance or disaster policies such as flood or earthquake insurance.
How insurance companies use your credit (WA State Insurance Commissioner)
Allstate Credit Scoring FAQs
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