Jane Dotson
Life insurance companies are increasingly using credit checks as part of the application review process. While your credit score alone won't impact your life insurance premiums, events in your financial history that affect your credit score could also affect how an insurer evaluates your application. A credit check could help speed up the review and make it easier (and cheaper) to get life insurance if you have good credit. However, even if you have poor credit, your credit will only be one of many factors that the insurance company considers.
| Characteristics | Values |
|---|---|
| Do life insurance companies check credit? | Yes, life insurance companies are increasingly using credit checks as part of the application review process. |
| How does credit score affect life insurance premiums? | Your credit score alone won't impact your life insurance premiums, but events in your financial history that affect your credit score could also affect how an insurer evaluates your application. |
| How does credit score affect the life insurance application? | Your credit score doesn’t directly affect your life insurance application, but the details of your financial history — like bankruptcy or large credit balances — will impact your insurance score. |
| What is a soft inquiry? | When you apply for life insurance, insurers will do a soft inquiry of your credit report, which does not impact your credit score. |
What You'll Learn
- Credit checks are becoming more common in the life insurance application process
- Credit checks can speed up the application process and make it cheaper
- Even with poor credit, it is only one of many factors that insurance companies consider
- A credit check will be recorded as a soft inquiry and will not impact your credit score
- Your credit score won't directly impact your life insurance application
Credit checks are becoming more common in the life insurance application process
When a life insurance company checks your credit, it is looking for specific information from within your credit history. For example, a bankruptcy filing in your credit report could impact your ability to be approved for a policy and its cost. The company may also receive a credit-based insurance score that predicts the likelihood that you will miss a premium payment. This score is used to help determine whether to require a medical exam, issue a policy, and set premium prices.
Credit-based insurance scores range from 300 to 850 and are intended to predict the likelihood that someone will fall behind on a bill within the next 24 months. Insurance companies may also pull your credit report and get a credit score when you apply for insurance. However, these credit-based insurance scores have a different purpose and score range than other types of credit scores, and they may also consider information from other data sources.
While your credit score is only one of many factors considered by insurance companies, there are steps you can take to improve your score. Paying loans and credit cards on time, maintaining a low amount of outstanding debt, having a longer credit history, and not applying for new lines of credit frequently can all contribute to a better insurance score.
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Credit checks can speed up the application process and make it cheaper
Life insurance companies are increasingly using credit checks as part of the application review process. While your credit score alone won't impact your life insurance premiums, a credit check can speed up the application process and make it cheaper.
A credit check can help insurance companies automate and accelerate underwriting. This means applicants may be able to get approved with limited or no medical exams, making it easier for more people to qualify for life insurance with lower premiums.
When a life insurance company checks your credit, it may be looking for particular information from within your credit history. For example, a bankruptcy filing in your credit report could impact your ability to be approved for a policy and its cost.
The company may also receive a credit-based insurance score that attempts to predict the likelihood that someone will miss a premium payment. It can use this score to help determine if it should require a medical exam, issue a policy, and how much to charge in premiums.
A good credit score can make it easier to get approved for life insurance without a medical exam and may lead to paying less for your policy. Additionally, an insurance credit check will never hurt your credit score. It will be recorded as a soft inquiry, which does not impact your credit score.
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Even with poor credit, it is only one of many factors that insurance companies consider
Life insurance companies are increasingly using credit checks as part of their application review process. While a good credit score can make it easier and cheaper to get life insurance, a poor credit score will not automatically disqualify you. Even with poor credit, it is only one of many factors that insurance companies consider when reviewing your application.
When you apply for life insurance, the insurance company will do a soft inquiry of your credit report. They will use your financial history to calculate an insurance score for you. If you've filed for bankruptcy, regularly miss credit card payments, or have a history of driving violations, you could face higher premiums or application rejections. However, each insurer generates the score differently, and it's an internal metric that isn't available for you to look up.
In addition to your insurance score, insurers will consider other factors such as your age, sex, health history, family medical history, hobbies, work, driving record, criminal record, and the type of policy you're applying for. These factors help them evaluate your overall risk and set the premiums for your policy.
If you have a poor credit history or a complex credit history, it's recommended to work with an independent insurance agent or broker. They can help you find the best insurance company and policy for your specific situation.
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A credit check will be recorded as a soft inquiry and will not impact your credit score
Life insurance companies are increasingly using credit checks as part of the application review process. A credit check could help speed up the review and make it easier and cheaper to get life insurance. However, even if you have poor credit, your credit will only be one of many factors that the insurance company considers.
When you apply for a loan or credit card, a creditor may pull your credit report and review your credit score. The scores that FICO® and VantageScore® develop generally range from 300 to 850 and are used to predict the likelihood that someone will fall behind on a bill within the next 24 months.
Insurance companies, including life, home, and auto insurers, may also pull your credit information and get a credit score when you apply for insurance. However, these credit-based insurance scores serve a different purpose and have a different score range than other types of credit scores. They also consider the information from your credit report differently, and some are even based on a mix of data from your credit report and other sources.
When a life insurance company checks your credit, it may be looking for specific information from your credit history. For example, a bankruptcy filing in your credit report could impact your ability to be approved for a policy and its cost. Or, the company may receive a credit-based insurance score that predicts the likelihood that someone will miss a premium payment. It can use this score to help determine whether to require a medical exam, issue a policy, and how much to charge in premiums.
While your credit is only one small piece of the puzzle, having good credit could make it easier to get approved for life insurance without a medical exam and may result in a lower premium.
It's important to note that when an insurance company checks your credit report or purchases a credit-based insurance score as part of its application review process, it will be recorded as a soft inquiry. Soft inquiries do not impact your credit scores. Unlike a hard inquiry credit check, which can occur when you apply for a credit card or loan, an insurance credit check will never hurt your credit scores.
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Your credit score won't directly impact your life insurance application
While your credit score may not directly impact your life insurance application, it's important to note that your financial history can still play a role in the evaluation process. Life insurance companies are increasingly incorporating credit checks as part of their application review. This allows them to speed up the underwriting process and make it easier for individuals with good credit to obtain insurance at lower premiums. However, even if you have poor credit, it is just one of the many factors considered.
When a life insurance company conducts a credit check, they are looking for specific information within your credit history. For instance, a bankruptcy filing in your credit report could impact the approval of your policy and the associated costs. The company may also calculate a credit-based insurance score, which predicts the likelihood of an individual missing a premium payment. This score helps determine whether a medical exam is required, the policy issuance decision, and the premium amount.
It's worth noting that the insurance score is an internal metric that insurers use to assess your overall financial risk. Factors such as timely loan and credit card payments, low outstanding debt, a longer credit history, and a varied mix of credit contribute to a favourable insurance score. However, insurers also take into account other personal factors, such as age and sex, when evaluating your risk and setting premiums.
In conclusion, while your credit score alone does not directly influence your life insurance application, the underlying financial factors that contribute to your credit score can impact your insurance options. Therefore, maintaining a good credit history and financial health is beneficial when applying for life insurance.
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Frequently asked questions
Life insurance companies are increasingly using credit checks as part of the application review process. While your credit score alone won't impact your life insurance premiums, events in your financial history that affect your credit score could also affect how an insurer evaluates your application.
Your credit score doesn't directly affect your life insurance application, but the details of your financial history — like bankruptcy or large credit balances — will impact your insurance score.
Your insurance score is an internal metric that the insurer uses to evaluate your overall financial risk. If the insurer determines that you have a bad insurance score, you could pay more in premiums, or in some cases, have your application declined.
Generally speaking, you'll have a better insurance score if you pay loans and credit cards on time, don't have a high amount of outstanding debt, have a longer credit history, haven't submitted many recent requests for new lines of credit, and have a varied mix of credit.
In addition to your insurance score, the insurer will consider your age, sex, and other personal details to evaluate your risk and set the premiums for your policy. Life insurance companies want to determine the overall risk of insuring you — in other words, how likely you are to die while your policy is active.
