What happens to your credit score if you buy life insurance?
Purchase life insurance is important if you have people in your life who depend on you financially, such as the children you support with your income. But even if you don’t make money, it can be beneficial to take out a life insurance policy.
Suppose you are a stay-at-home parent looking after your young children so your spouse can work. If something happened to you, your spouse would be financially deprived because he would not have childcare.
If you want to apply for life insurance, you may be wondering how this process will impact your credit score. This is especially true if you are also planning to apply for another large loan, such as a mortgageShort term.
The good news, however, is that applying for life insurance shouldn’t impact your credit score at all. This remains true even if the company you are applying to decides to tap into your credit.
Life insurance and your credit score
Some life insurance companies do not perform credit checks on applicants. If that’s the route you choose to take, applying for coverage shouldn’t change your credit score at all.
But a growing number of life insurance companies are do credit checks as part of the application process. And that can be a good thing and a bad thing.
If your credit is strong, this could help you save money on life insurance premiums. Bad credit, on the other hand, could serve as a red flag and lead to higher premium costs.
Either way, if a life insurance company pulls your credit report to check your financial situation, it will be considered an informal request. And informal inquiries don’t change your credit score like serious inquiries might.
A thorough investigation of your credit report will take place each time you ask to borrow money, whether through a mortgage, car loan, Personal loan, or credit card. A serious investigation will usually result in a minor impact on your credit score – somewhere in the ballpark of five to 10 points.
A single serious request won’t cause much damage, but multiple serious requests in a short period of time could result in a more noticeable drop in your score. But luckily, that’s not something you need to worry about when buying life insurance.
Roll that ball
Life insurance is something that is quite easy to put off. After all, the application process can take a bit of time, and those bonuses might be something you’d rather avoid paying a little longer. But you never know when a tragedy might strike, so it’s important to have that protection in place. If you haven’t started this groundwork yet, it’s worth moving on as soon as possible.
The good news is that you can easily apply for life insurance alongside another loan without having to worry about the impact on your credit score. So don’t let the fact that you are trying, for example, to buy a car or a house, a motivation to delay this application for life insurance even more.
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