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Oct 13, 2016

Many of us have heard before that shopping for insurance, opening new lines of credit, and even shopping for a new car loan hurts your credit; in fact, most of us have been told at one time or another that every time a company or lender checks your credit, it results in your score going down. Although this is true for some applications, the truth is that it doesn’t always ring true. For example, when you shop for insurance plans, it actually does not hurt your credit. But why not?

The Soft Inquiry vs. The Hard Inquiry

To understand why shopping for insurance doesn’t bring your credit score down, you first need to understand the difference between two types of inquiries that can be done “against” your credit report: the hard and the soft. While it is true that both types enable a third party to view your credit, only a hard inquiry will affect your score.

A soft inquiry is one that happens when your credit is checked as part of a background check, like those done for employers, pre-approval offers, and even you when you check your own score. This type of inquiry does not affect your credit score.

A hard inquiry, on the other hand, is not only recorded in your credit report, but will also affect your score. These usually occur when a lender, credit card issuer, or the like checks your credit in order to come to a lending decision. These could lower your score by a few points or so, and can remain on the report for up to two years. As time passes, however, the negative effect on your credit score decreases or even disappears, even before the hard inquiry falls off your credit report.

Shopping for Insurance and Your Credit Score

When you are shopping for insurance coverage, insurance companies do run your credit, but it doesn’t affect your score. You should also know that your FICO score can be different than your insurance score. Don’t be afraid to shop around for insurance, and don’t fall prey to the false idea that doing so hurts your credit; it doesn’t! Remember to contact Summit Insurance Advisors for a free, accurate, and quick quote. We provide the best value with excellent customer service. Call or go online to request a quote!



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