If you have concerns about your individual credit score and wonder if your score will affect your life insurance premiums, keep reading. It may seem confusing that the answer is both yes and no, but we will explain the connection between credit and insurance.
Insurers generally run a soft credit check before providing life insurance. While they don’t look at your actual score number to determine eligibility, that doesn’t mean that your credit report isn’t important. While the score itself isn’t of much concern, there’s more information in your credit report than just a number. Looking into your credit report will tell an insurer if you’ve filed for bankruptcy, if you are delinquent with other payments, and whether or not you carry a high credit card balance. Based on this information, you could have higher monthly premiums or even be ineligible for some policies.
In addition to your credit report, insurers will gather a great deal of information during the application process. Using a combination of these sources of information, they will assign you an insurance score. Unfortunately, there is no way for you to determine your own insurance score, as almost every insurer calculates it differently based on their unique criteria. But just like with your credit score, your insurance score will be in better standing if you keep your credit use low, you make your payments on time, and you have a longer credit history. For the best insurance score, it is also advised to wait 12-24 months after a bankruptcy is discharged. This means that, ultimately, your credit report is the major factor in determining your insurance score.
Cost of Insurance
However, when anticipating what your monthly premiums will cost, credit is just one piece of the puzzle and certainly not the most important one. Insurers examine other reports during the application process, including your driving record, criminal record, medical records, and prescription drug history. Your public data may show other risk factors to consider. Your Medical Information Bureau (MIB) report, which details previous insurance applications, will also be reviewed. All this information, combined with your insurance score, will be used to determine eligibility. So while your credit report may be viewed and have some effect on either insurance cost or access, your score itself is not of great significance.
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