Why Do Insurance Companies Check My Credit?

Most insurance companies use credit to provide a price or to establish the acceptability of an applicant. By using an insurance score, which is a rating factor based upon credit, a policy will be either priced lower (for good credit) or more (for bad credit).

Studies have shown a close correlation between an individual’s credit score and their likelihood to make a claim on their insurance. Companies that use credit create an insurance score by establishing different weighting factors for various components of an individual’s FICO score. This means that each insurance company uses credit with regard to pricing or acceptability differently. Making it even more important to periodically review your credit from all 3 credit reporting companies.

Actuarial statistics show that people who have a poor insurance score are more likely to file a claim.

Insurance scores do not include data on race or income because insurers do not collect this information from applicants for insurance.

The use of insurance scoring does not affect an individual’s FICO score.