Did you know you're a gamer? Whether you consider yourself one or not, you already live in a gamified world where the actions you take can affect a score that communicates your skill level to others—aka your credit score. It goes up, it goes down, you can deliberately influence it and protect it from outside influence, or you can just pretend it doesn't exist. But whatever you do, it stays with you year after year, an invisible reputation badge. (And it turns out it's not the only one you carry, but we'll get to that in a moment.)
The credit score was already ubiquitous, but it seems to be touching an increasing number of elements in modern life. Traditionally if you bought a car or a home, or you opened a credit card account, your credit score was factored into the final decision to extend credit to you. Now it's being reviewed for things like an application for adoption, an employment screening, and even your next date.
Auto and home insurers look at your credit score, too—or more typically, at a similar "insurance credit score" built from in-house data and not made publicly available—so it's reasonable to wonder whether something similar happens when you shop for life insurance. Can your credit score affect the amount you pay in premiums for a life insurance policy, or even influence whether you're approved or not?
Not really. Or to be more precise, although life insurers can review your credit history (and by law will tell you if they do), they rarely bother unless there’s something on your application that warrants a closer look. For example, with most insurers a Chapter 7 bankruptcy filing in the past 12 months will result in an automatic decline, so if that’s in your past then the insurer will want to confirm how long ago you filed.
The main reason insurers don't bother (other than in special circumstances like the one above) is that they are much more interested in your estimated lifespan than in your history of late payments. After all, since an insurance policy isn't a line of credit, the insurer can simply stop covering you if you don't pay your premiums.
But the other reason is that it turns out you carry some other invisible scores around with you in addition to your credit score, and life insurance companies find those far more useful.
The personal records that life insurance companies actually care about
The other MIB
Almost every insurer today is a member of a trade group originally called the Medical Information Bureau but now just MIB, which is not to be confused with the secret government agency that keeps track of extraterrestrials. This more pedestrian MIB serves as a clearinghouse for information about recent life and health insurance applicants, and it's the reason why you can’t simply request a do-over when applying for life insurance. For example, if you’re caught lying on an application with one life insurer and you try to apply for a policy with a second one, the second insurer will know about your earlier application.
If the insurer you're working with wants to check the MIB first, this will be disclosed to you as part of the application process and you'll have to sign an authorization. In practice this is little more than a formality, but technically it means you'll know when the MIB is involved.
One good thing about the MIB is that unlike a proprietary "insurance credit score," you have access to your MIB data. If you've applied for individual life or health insurance (meaning not through a group or employer) in the past seven years, you probably already have a record with the MIB, in which case you can request a copy of your MIB report.
Driving and drugs
Two other places insurers go to when processing an application are your driving history and your prescription drug use history, since both of these can help give the insurer a higher-resolution picture of insurability.
Driving accidents and tickets are a big warning sign to insurers that you may be a higher-risk applicant than you first appear. Most insurers will ask you to list this sort of thing up front (which is why we include the questions in our own free quoting engine—it helps us give more accurate quotes). But since insurers don't make money off of the honor system, they'll verify the info by checking your records with your state's Department of Motor Vehicles.
When it comes to prescription drug use, the medicines you take, as well as the dosage and length of use, can indicate past and present health issues and their severity. As of early 2015, every state but Missouri has a prescription drug database of some sort, and insurers can also buy aggregate data on your prescription drug use from third party data brokers like IntelliScript and MedPoint.
As with the MIB, you have to give permission to the insurer to access your pharmacy history, but again it's little more than a formality since the insurer won't proceed without it. But you can request a copy of your prescription drug history from these brokers so you know what your insurer is seeing. (For IntelliScript, call 877-211-4816; for MedPoint, call 888-206-0335.)
Insurers will also check for any recent criminal activity, for example if you’re currently in jail, awaiting trial, or on probation or parole. Most carriers will postpone the application until you’ve been out of jail or off probation or parole for at least 12 months.
Your health and your lifestyle
As I mentioned above, life insurance companies aren't that concerned about whether you'll pay your premiums on time. Instead, they want to know how risky it will be to cover you so that they can price the policy accordingly—and the best way to do this is to look at your health and your overall lifestyle.
When it comes to information about your health, the insurer first relies on you to provide accurate information about yourself and your immediate family. From there, depending on your demographic data (like age and sex) as well as the answers you provided, the insurer may reach out to your doctor for medical records through an Attending Physician Statement, or APS. In the most common scenario, the insurer will also do a little primary research of its own and pay to have you undergo a short medical exam.
(Pro tip: the wait to get an APS your doctor is often the longest part of the life insurance application process; it’s not unusual for things to come to a standstill for several weeks while the insurance company tries to track down and collect your medical records. Knowing this ahead of time will help make the waiting period a little less frustrating.)
A lof of your health history will be beyond your control, but at the same time this is the one area where moderate changes to your health can have a dramatic impact on the cost of your insurance. If you can maintain a healthy weight or quit smoking, for example, then you might qualify for a lower premium after enough time has passed to convince the insurer that the change is permanent.
This isn’t a euphemism for anything—the insurer actually wants to know your general lifestyle, specifically whether you are inclined to participate in activities that statistically affect the chance that you’ll die from anything other than old age. Do you regularly scuba dive? Are you a rock climber? Do you wrestle alligators during the summer months? The insurance company would like to know! This won’t always drive up your premium, but it can make a difference as to what company you eventually go with. For example, if your broker knows you’re a weekend rock climber she can focus most of her attention on insurers who take a more lenient view of the sport. You might also be able to find a friendlier policy through an affinity group like the North American Rock Climbers Society, or NARCS (which is a totally fake group that I made up for this example).
Focus on the bigger picture
There are plenty of good reasons to maintain a high credit score, but getting life insurance isn't one of them. People with near-perfect credit scores might qualify for a rare "top-tier" rating and therefore a lower premium, but this won't matter unless you’re in the top 5 percent or so of credit score holders. And even then, you might get rated down over something in your medical history or on your driving records.
It may seem simplistic, but the best way to find a good price is to get as healthy as you can and then stay that way, and to make sure your broker or agent has an accurate view of your risk profile so that she can find the insurers that are the best fit in terms of price and adaptability.
And since there are no save points in real life, maybe don't wrestle alligators so much next summer.
Special bonus section on your credit score
By the way, so long as I’m writing about credit scores and you’re reading about it, there are some basic facts you should know.
Once a year, go to annualcreditreport.com and order a free credit report from each of the three major agencies. Then review the reports for inaccuracies. If you find any, take a deep breath and try to get them fixed. This is a good place to start.
If you aren’t planning on using your credit score for any big purchases for a while, consider paying to put a lock on each of your three reports. This will prevent anyone from falsely applying for credit in your name. Just remember that you won’t be able to apply for credit either until you unlock the accounts.
Don’t rely on merchants to keep you in the loop when it comes to data breaches, because it may be months before they release the news to the public. When a breach does happen and the company offers you a limited time credit monitoring service, by all means take the offer but don't rely on it exclusively. (The recent Anthem data breach is a good example why: the credit monitoring service Anthem has offered to victims only tracks one of the three credit bureaus.)
If you have a credit card then it's possible that you already have access to your credit score, because many card issuers are offering this now as a perk. We do not recommend CreditKarma.com, because it shares sensitive private information in the subject line of emails.