When shopping around for a home, auto, or life insurance policy, you’ll be asked a series of questions about yourself, your home, or your car before obtaining a quote.
But what about your credit score? Will your insurance company also want to verify your creditworthiness before quoting you a rate for a policy?
Key Points
- Insurance companies can check your credit score to determine your policy rate and coverage.
- It’s not mandatory for you to release your credit score, and insurers are required to obtain your consent before accessing your credit report.
- While a credit check isn’t required, a good credit score can help you minimize the costs of your policy, while a low credit score could result in higher premiums.
Do Insurance Companies Check Credit In Canada?
Insurance companies may check your credit scores to determine your eligibility for coverage and the premiums charged. However, the insurance provider must obtain your explicit consent to have your credit report pulled.
Do Car Insurance Companies Check Credit In Canada?
Car insurance providers may check credit scores as a way to assess risk levels. According to insurers, bad credit scores and poor driving habits are linked. As such, insurance providers like to check credit scores to determine what type of premium prices and coverage they’re willing to provide.
However, not all provinces allow insurance companies to ask for credit scores when it comes to car insurance. Most provinces in Canada allow insurers to ask for credit scores, except Ontario and Newfoundland. In these two provinces, the practice of insurance companies requesting credit checks as a means to calculate car insurance premium rate risks is banned under provincial regulations.
Do Home Insurance Companies Check Credit In Canada?
Home insurance doesn’t have the same regulations as car insurance in Canada. So, home insurance providers in all provinces are allowed to request access to your credit score. That said, you must provide consent. Insurers are not permitted to access your credit file without your permission.
Like other types of insurance, home insurance premiums and coverage may be influenced by a person’s credit score. So, if you have very good credit, you may be able to access better coverage and lower premiums.
Is It Legal For Insurance Companies To Base Premiums On Your Credit Score?
Insurance companies are required to comply with provincial laws when it comes to how they conduct business.
Provincial Regulations On Insurance Companies And Credit Checks
Many provinces and territories don’t have rules that forbid insurance providers from conducting credit checks and using credit scores to determine premiums and risks. However, some provinces do have specific rules surrounding this practice:
- Ontario: Using credit information for auto insurance is banned.
- Alberta: Partial restrictions exist on using credit information for auto insurance. More specifically, car insurance providers in Alberta can only access a driver’s credit score if the individual has applied for a premium plans.
- BC: Car insurance providers are allowed to use your credit information to determine insurability.
- Quebec: Car insurance providers are allowed to use your credit information to determine insurability.
- Newfoundland and Labrador: Using credit information for auto insurance is banned.
How Can Insurance Companies Use Your Credit Information?
In order to use your credit information, insurance companies must abide by certain rules, as per the Insurance Bureau of Canada’s Code of Conduct for Insurer’s Use of Credit Information:
- They must have your consent to run a credit check on you.
- They cannot deny coverage based on your credit score or lack of credit.
- They must inform you of the consequences of refusing to release your credit information (ie. you may not qualify for lower rates or discounts)
- They must base their underwriting decisions on other information available to them if they have no credit.
- They must use other non-credit information to establish premium fees and coverage
- They must keep your credit information confidential
Can You Refuse Your Insurance Company From Checking Your Credit Score?
Before an insurance provider can run a credit check on you, they will have to get your consent first, as mentioned. You can refuse to have your credit score checked if you so choose, and your insurance provider will still be obligated to provide you with a quote without it.
That said, the lack of a credit check could impact the premium you are quoted. If your credit score is high, you could get a lower price on an insurance policy. In this scenario, you may be doing yourself a disservice by not allowing the insurance company to check your credit score.
Why Do Insurance Companies Check Credit Scores?
There are key reasons why insurance providers check credit scores:
To determine premium fees and coverage amount. Your credit score is a reliable indicator of your financial health and risk in the eyes of your insurance provider. If you have a high credit score, you may be considered a lower-risk client and may be rewarded with lower premiums and more comprehensive coverage as a result.
To ensure you’ll keep up with payments. Since you’re responsible for making premium payments to keep your policy active, your insurance provider will want some form of assurance that you will pay on time. Your credit score will give them an indication of your ability to make timely payments.
To minimize claims. Your credit score may also determine the likelihood of you filing a claim. Insurance companies make money through the premiums they charge and want to minimize the number of claims they have to pay out. Someone with a low credit score may be more likely to file a claim.
Where Can You Check Your Credit Score?
In Canada, there are two main credit bureaus: Equifax and TransUnion. You can obtain a mailed copy of your credit report for free every 12 months from either one of these bureaus. Keep in mind that while Equifax also provides your credit score for free, TransUnion requires a monthly paid subscription for you to check your credit score (except in Quebec).
Alternatively, there are various other online sources that you can obtain your credit score from for free, including the following:
| Cost | Credit Score | Credit Report | ||
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | - |
What Happens If You Don’t Have Any Credit History?
If you haven’t had the chance to establish credit, then your insurance provider will not be able to use a credit score to determine your creditworthiness or financial health. Instead, they’ll have to go by any other available information about your financial position and risk level, depending on the type of insurance you’re looking to take out.
For instance, if you’re applying for auto insurance, your insurer may consider the following:
- The type of car you drive
- The amount of mileage you put on it each year
- Your driving record
- Your age
- Your sex
If you’re applying for home insurance, the insurer may want to know more about the following:
- The age and condition of your home
- Where your home is located
- The cost to rebuild the home
- How far the home is from the nearest fire hydrant or hall
At the end of the day, an insurance provider does not necessarily need to check your credit score to issue you a policy. They are obligated to make an underwriting decision and use any information available to them, even if you don’t consent to a credit check.
Final Thoughts
It’s standard practice for insurance companies to request to check your credit score before determining how much to charge you for an insurance policy. A good score can result in a lower rate, and vice versa. But you don’t have to allow the insurance provider to run a credit check on you, especially if you don’t yet have any credit established. Just be aware that no credit check could impact the rate you’re quoted.
