Why Insurers Want a Credit Check for Insurance Quotes
Posted by Miller Hanover Insurance Agency on
Understanding your financial habits is something underwriters expect to know whenever anything related to insurance arises. This is why insurers will pull a credit check for quotes. While not every professional insurance agency does this, you can expect it most of the time.
In essence, insurance underwriters can use credit scores as reliable indicators to determine how much premium to charge a potential client. At Miller Hanover Insurance, we consider credit scores before issuing any policies. Credit scores, however, are not a make-or-break factor in providing coverage to our customers.
A credit score has a scale from 300 to 850: the higher your credit score figure, the better. Having a good credit score is a positive thing because it demonstrates creditworthiness and a low risk of defaulting on one’s payments, at least from the lender’s perspective.
By law, companies cannot deny you insurance coverage or increase your rates if you have an unfavorable credit score. However, insurance providers prefer customers with good credit scores. This is because customers with good credit represent a low risk. As such, insurance underwriters will go to great lengths to bring in business from these types of customers by offering lower rates to them.
Rules companies must follow when doing credit checks
It’s crucial to differentiate between a credit report and a credit score. These terms can sometimes be used interchangeably when discussing credit checks, even though they have different meanings.
A credit report sums up your credit history port details on all your accounts’ balances, credit card debts, and payment history. The report will also provide your credit score, a 3-digit number ranging from 300 to 850. It is a rating system derived from the information obtained from your credit report.
In the interest of transparency and consumer protection, there are regulations in place to ensure that companies do not exploit the information obtained during credit checks, including:
Underwriters and all other institutions must arrive at their lending decision based on other factors if the consumer lacks a credit history.
A company cannot obtain a consumer’s credit information without the consumer’s prior consent or knowledge.
There are instances when a consumer believes that unfortunate events may have negatively influenced their credit rating. For example, a consumer had lost their job and was unable to make repayments on a previous mortgage or other repayment plans. In that case, this could reflect negatively on their credit history. In such instances, the company or underwriter must provide clear guidance.
Most importantly, companies cannot deny consumers insurance coverage if consumers opt not to provide their credit information.
A consumer can always object to a credit check, meaning that companies and underwriters cannot obtain this information. You must provide consent in clear terms to allow them to pull your credit. However, you can still get coverage after denying access to your credit information.
Companies and underwriters can look at a host of things like your age, marital status, employment history, and other factors when considering coverage. In the case of home insurance, things like susceptibility to extreme weather conditions and the age of the house also play a role.
No matter what your credit is like, our underwriters at Miller Hanover Insurance can get you good insurance coverage. Contact us today for a quote at https://www.millerhanover.com/.
Miller Hanover Insurance
334 High St, Hanover, PA 17331
Contact Number: (717) 637-9265