The Truth About Credit Checks

The Truth About Credit Checks
February 22, 2019 CommunityAmerica Insurance Agency
In Blog

When it’s time to apply for a loan or make a large purchase, one of the first steps will be for a lender or seller to check your credit score. Even getting a credit card offer in the mail has most likely been directly affected by your credit profile. You’ve probably heard that getting your credit score checked affects the score itself, dropping your score a few points just for the check.

While that’s true, it’s not true of every check. The question we hear most often is if getting an insurance quote will hurt your credit score. It will not!

Two Kinds of Credit Pulls

There are two kinds of credit checks: a soft inquiry or “pull” and a hard one. Soft inquiries won’t affect your score in any way, but a hard inquiry will dock you points. While they show the same information, a soft will not affect your score because it’s for research purposes only. 

Soft Inquiries

Most soft inquiries happen without you knowing it; for things like credit card offerings in the mail, or possibly even job applications. Insurance applications also fall under this category. Since you are not requesting credit specifically, you are not penalized when these inquiries happen.

Also in this category is checking your own credit using a service like Annual Credit Report. It’s a good financial habit to keep an eye on your credit report and your behaviors—and see what you can do to keep your credit healthy.

Hard Inquiries

Hard credit pulls, on the other hand, are pulled as an indicator that you’ve asked to borrow more, so you’re being put in the hot seat, essentially. Because these are used to verify your financial responsibility, they will drop your score. A hard inquiry will likely cost you no more than five points, but that will vary based on each individual’s history.

Insurance Checks

When we go out to the marketplace to shop for insurance on your behalf, the insurance carriers provide us with rates based on things like credit history, claim history and past insurance information. Different carriers look for different things, and may place more importance on one factor than another. Even your marital status could affect the score that insurance carriers pull. While this insurance quoting process doesn’t affect your credit score, your credit score has an influence on the rate we can offer you. This is just one great reason we recommend using a broker like us—we’ll make sure you’re getting a quality, fair rate.