FICO® Scores and Insurance Shopping

Auto inscompanies

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 lower-risk client, someone who pays their bills on time and in full and is responsible. You will be offered more affordable insurance rates than others of equal risk property. 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.

Image attribution

 Financially Speaking™ James Spray, CCMB, CNE, FICO Pro
CO LMO 100008715 | NMLS 257365 | December 17, 2011

 Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

One comment on “FICO® Scores and Insurance Shopping

  1. James Spray says:

    If you think all insurance companies offer the same policy at a similar price, think again:


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s