Credit Score & Insurance
Many insurance companies may use your credit score to determine discounts you may qualify to receive for your insurance.
On an insurance policy, we make an agreement that we will pay you a certain amount of money if you have a loss. It is very hard to predict when a loss will happen and how much it will be. This is even more hard for a new client.
Studies show that your credit score can be a great indicator of potential for claims on home insurance. This score gives an idea of a person’s ability to manage their finances, or a measure of their financial health. Poor financial health/management have proven to increase the likelihood of a loss. A person who has a hard time making their mortgage payment may not be able to maintain their home. As a result, this, unfortunately, could make it more of a risk for them to have a claim. Also, it could be more of a risk for them to have many smaller claims that other homeowners would often fix themselves.
Soft Hit Inquiry vs. Hard Hit Inquiry
We refer to this credit check to as a “soft hit inquiry”. It will not affect your credit rating like a regular “hard inquiry”. For example, when a bank checks it when you apply for a line of credit, mortgage, or if you are financing a vehicle. A soft hit credit check does not use all the information that a regular check does. It will use factors that show if you pay your bills on time, and if you have a lot of outstanding debt.
Insurance companies only want to offer the best pricing. They offer this to their clients who have proven to be stable, responsible, and lower risk for claims.
If you are unsure about your credit rating, you can always get a copy of your report from Equifax or similar companies.
If you have any questions, please don’t hesitate to ask! That is what your broker is here for!