Much like in other areas of life and work, our credit history has an impact in ways we don’t always see.

In many jurisdictions, insurers can use your credit history to help determine premiums. The practice began in the 1990s, giving rise to what are known as credit-based insurance scores. Some studies have found correlations between certain elements of credit performance and the risk of an insurance loss. Much like in other areas of life and work, our credit history has an impact in ways we don’t always see.

However, while your credit can affect your insurance rates — for better or worse, your insurance policy is less likely to affect your credit. When insurers pull your credit to help set a premium, the inquiry is a soft pull. In other words, there’s no request for new credit. Instead, the insurer is asking for a snapshot of your history. Because you aren’t asking for new credit, the soft pull has no effect on your credit rating with the major credit bureaus. You may see the inquiry on a credit report, however.

Where you can find an impact on your credit score is when there are unpaid premiums that the insurer has earned. In most cases, we’re paying ahead when making insurance premium payments. However, there can be cases where we haven’t paid enough — or a payment was declined — and these situations can lead to a bill for earned premiums that must be paid. If the balance isn’t paid, expect a ding to your credit. You may also have some trouble finding coverage elsewhere.

Have any questions? We can help.

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