Your credit score doesn’t affect how much you pay for life insurance, but the contents of your credit report, like past bankruptcies, will. Life insurance companies make a soft inquiry of your credit report and assign you an insurance score based on your income and debts, insurance history, and driving history, which influences your final premiums.
You can’t look up your insurance score, but 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. Here are the red flags providers look for and how they factor into your coverage.
Insurers consider the factors that contribute to your credit score, not the specific number.
Missing credit card payments or bankruptcies could lead to more expensive life insurance.
Wait 12 to 24 months after a bankruptcy discharge to be eligible for more affordable rates.
Your health and other risk factors also affect your final premiums.
Red flags to look for in your credit report
Even though your credit score won’t directly affect your life insurance application, certain details from your credit report can indicate that you might be a financial risk to your provider, such as:
Carrying large credit card balances
High percentage of credit card use
Late or missing debt payments
Every provider weighs these factors in your life insurance application differently. For example, all insurers have rules about bankruptcy, and many require that any bankruptcy be discharged for 12 to 24 months before you can purchase a policy at all. Others may see former bankruptcies on your report and simply offer you a higher premium.
How do credit insurance scores work?
Credit report details and insurance claims information influence your insurance score (sometimes called a credit-based insurance score or credit insurance score). Each insurer generates the score differently, and you can’t look up your insurance score like you can a credit score.
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
Have a varied mix of credit
Your credit insurance score does not factor in your age, sex, or other personal details. However, your life insurance company will use those factors to set your premiums during underwriting.
If you have bankruptcies on your report or a more complex credit history, an independent insurance agent or broker can help you find the best insurance company for you.
Other reports that impact your life insurance
Your credit report and insurance score are just two of the many factors that influence your life insurance premiums. Life insurance companies want to determine the overall risk of insuring you — i.e., how likely you are to die while your policy is active. They’ll also consider:
Criminal records: The type of crime you committed matters — misdemeanors won’t raise flags, but you usually need to wait for felony charges to be dismissed, be out of jail, or off probation for at least 12 months to qualify for coverage. Multiple crimes on your record will also raise rates, and prepare to answer questions about your criminal history.
LexisNexis risk scores: LexisNexis aggregates public information about you that might raise concerns for an insurer. The company assigns you a risk score based on that public data. Insurers review the score for any details previous reports didn’t reveal.
Medical Information Bureau (MIB) report: Your MIB report contains details about any past insurance applications you’ve submitted. Insurers use the MIB to confirm your health information and look for red flags like previous application denials due to fraud.
Medical records: In addition to attending physician statements (APS) from your current doctors, insurers may also request records from any of your previous doctors to learn more about your health history.
Motor vehicle report: If you have DWIs or reckless driving charges, some insurers may refuse to offer you coverage. If you have multiple moving violations on your report, the insurer may raise your premiums. Accidents and auto insurance claims may also affect your insurance score.
Prescription drug history: The medicines you take, as well as the dosage and length of use, give insurers information about your past and present health conditions and their severity.
The particulars of your credit report and the findings from several other agencies will impact how much you pay for a life insurance policy, even though your credit score itself doesn’t. In general, indications of risk — whether medical or financial — lead to higher premiums, while stable health, finances, and hobbies will earn you more affordable rates.
An independent insurance agent can help you find a policy that fits your needs, even if you think your financial history may present some risk factors.
Frequently asked questions
Do life insurance companies check my credit score?
Providers will perform a soft credit check when you apply for a policy but will focus on the details of the credit report that contribute to your score, not the score itself.
How does my credit score affect what I pay for insurance?
Insurers are looking for evidence that you’re financially reliable and aren’t likely to miss premium payments. They’ll look at your credit report to identify any signs of financial risk, like bankruptcies.
How is an insurance score calculated?
Every company calculates insurance scores using its own formula. The score reflects reporting that impacts your credit score, like payment history and length of credit history, and insurance history. Higher scores mean you’ll enjoy lower premiums, and vice versa.