FICO® Scores & Insurance Shopping

Related Industry FICO® Score Requests

According to FICO®, credit which is requested within the same industry – in particular mortgage and auto – shall only count as one credit hit to the borrower within a 45 day period.  Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage and auto loan inquiries made in the 45 days prior to scoring. So, if you find a loan and the corresponding insurance within 45 days, the multiple inquiries won’t affect your score while you’re rate and coverage shopping.

‘Hard’ vs. ‘Soft’ Credit Pulls

Another way to look at the same issue is this; there are two types of inquiries: ‘hard’ and ‘soft’ pulls. A hard pull refers to credit inquiries for acquiring credit, like from a credit card company or a mortgage lender. A soft pull is an inquiry that will review your FICO® score; much like an insurance company would in order to calculate an insurance quote.

Soft pulls often aren’t recorded on your credit report. If they are, the insurance company’s name will be listed on your report, but the inquiry will not lower your credit score as it is coded to relate to the specific industry such as a mortgage or vehicle loan.

Credit Scores Affect Insurance Costs

It’s no secret that a high credit score is a valuable thing. And while shopping for insurance quotes may not lower your credit score, it is important to know that a good credit score can lower your insurance costs.

Insurance companies and agents that see a potential client with a high credit score will consider you a low-risk client, someone who pays their bills on time and in full and is responsible. You will be offered more affordable insurance rates. Good credit saves you money in many different arenas of your life, including insurance.

Credit Warning – Your Lender Must Advise You

Once your mortgage lender has pulled your credit and prior to closing and funding, always check with your lender before shopping for furniture, appliances, automobiles, credit cards or anything whatsoever that will cause a hard credit pull. With the tightening of credit over the past few years, underwriting will pull your credit again prior to funding your “approved” loan. Lo and behold you may no longer be approved.

As always do not hesitate to write back with comments, questions or concerns.  I read everything that comes back, even though I don’t always get a chance to respond as quickly as I would like, I always respond.

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Financially Speaking – James Spray, CCMB, CNE – December 17, 2011

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