Will Getting An Insurance Quote Affect My Credit Score
Introduction
Getting an insurance quote is a necessary step when you're shopping for coverage. But, like many people, you may be concerned about how it will impact your credit score. This is a common question that many people have, and the answer is not straightforward. In this article, we'll explore whether getting an insurance quote will affect your credit score, and if so, how much.
What is a Credit Score?
Before we dive into the topic, let's first define what a credit score is. Your credit score is a three-digit number that represents your creditworthiness. It's based on your credit history and is used by lenders to determine whether to approve you for credit or loans, and what interest rate to charge you.
How is Credit Score Calculated?
There are several factors that go into calculating your credit score. Payment history, credit utilization, length of credit history, new credit applications, and credit mix are all taken into account. Each factor is weighted differently, and the exact formula used to calculate your score is a closely guarded secret.
How Insurance Companies Use Credit Scores
Many insurance companies use credit scores as a factor when determining your premium. They believe that people with higher credit scores are less likely to file claims, and therefore, are less risky to insure. This means that if you have a poor credit score, you may end up paying more for insurance than someone with a high credit score.
Soft Inquiries vs. Hard Inquiries
There are two types of credit inquiries: soft and hard. A soft inquiry is when you check your own credit score or when a company checks your credit score for a non-lending purpose, such as a background check. Soft inquiries do not affect your credit score.
On the other hand, a hard inquiry is when you apply for credit, such as a loan or credit card. Hard inquiries can lower your credit score by a few points and remain on your credit report for up to two years.
Insurance Quotes and Credit Scores
When you get an insurance quote, the insurance company will perform a soft inquiry on your credit score. This means that getting an insurance quote will not lower your credit score.
However, if you decide to purchase the insurance, the insurance company may perform a hard inquiry on your credit score. This could potentially lower your credit score by a few points, but the impact is usually minimal and temporary.
How Much Will My Credit Score Be Impacted?
The impact of a hard inquiry on your credit score is usually minimal and temporary. According to FICO, a single hard inquiry will typically lower your credit score by less than five points. The impact will be even less if you have a high credit score.
Conclusion
Getting an insurance quote will not affect your credit score, as long as it's a soft inquiry. If you decide to purchase the insurance, there may be a minimal and temporary impact on your credit score due to a hard inquiry. However, the impact is usually not significant and should not deter you from shopping around for the best insurance rates.