How Insurance And Your Credit Report Affect Each Other?

Meta Description: Are you aware of the relationship between your credit report and insurance? Read on to understand how your credit score impacts your insurance rates.


Your credit report plays a crucial role in determining your financial health. It can also affect several aspects of your life, including your ability to secure a loan, rent an apartment, or even get a job. However, did you know that your credit report can also affect your insurance rates? Yes, it's true! Many insurance companies use credit scores as one of the factors to calculate insurance premiums. This article will explain the relationship between insurance and your credit report, and how they affect each other.

Why do insurance companies use credit scores?

Insurance companies use credit scores to assess the risk of a potential customer. Studies have shown that people with low credit scores tend to file more claims than those with high credit scores. As a result, insurance companies believe that customers with low credit scores are riskier to insure and may charge them higher premiums.

How is your credit score calculated?

Your credit score is calculated based on various factors, including your payment history, outstanding debts, length of credit history, types of credit used, and recent credit inquiries. The most commonly used credit score is the FICO score, which ranges from 300 to 850. The higher your credit score, the better your creditworthiness.

What factors affect your credit score?

Several factors can affect your credit score, including late or missed payments, high credit card balances, and a high number of credit inquiries. Other factors that can negatively impact your credit score include collections, bankruptcies, and foreclosures.

How does your credit score affect insurance premiums?

Your credit score can affect your insurance premiums in several ways. Insurance companies use credit-based insurance scores, which are similar to credit scores, to determine the likelihood of a customer filing a claim. A low credit-based insurance score can result in higher insurance premiums, while a high score can lead to lower premiums.

Can you get insurance with bad credit?

Yes, you can still get insurance with bad credit. However, you may have to pay higher premiums than someone with a good credit score. Additionally, some states prohibit insurance companies from using credit scores to determine insurance rates.

How can you improve your credit score?

Improving your credit score can help you secure better insurance rates. Here are a few tips to improve your credit score:

  • Pay your bills on time.
  • Keep your credit card balances low.
  • Don't close old credit card accounts.
  • Limit new credit inquiries.
  • Check your credit report regularly for errors.

Frequently Asked Questions (FAQs):

Q: How often do insurance companies check credit scores? A: Insurance companies may check credit scores when you apply for a new policy, renew your existing policy, or make changes to your policy.

Q: Does shopping for insurance affect your credit score? A: No, shopping for insurance doesn't affect your credit score. Insurance inquiries are considered soft inquiries and don't impact your credit score.

Q: Can insurance companies deny coverage based on credit scores? A: No, insurance companies can't deny coverage based solely on credit scores. However, they may use credit scores as a factor in determining insurance rates.

Q: Can you dispute errors on your credit report? A: Yes, you can dispute errors on your credit report by contacting the credit bureau and providing evidence of the error.


Your credit report and insurance may seem unrelated, but they have a significant impact on each other. Insurance companies use credit scores to determine the likelihood of a customer filing a claim, which in turn affects the insurance premiums. It is essential to maintain a good credit score to secure better insurance rates.

If you have a low credit score, don't worry; you can still get insurance. However, you may have to pay higher premiums. The good news is that you can take steps to improve your credit score, such as paying your bills on time, keeping your credit card balances low, and limiting new credit inquiries.

In conclusion, it's crucial to be aware of the relationship between insurance and your credit report. By maintaining a good credit score, you can not only secure better insurance rates but also improve your financial health overall. So, make sure to check your credit report regularly, dispute any errors, and take steps to improve your credit score.