What Happens to Your Credit Score if You Apply for Life Insurance?

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  • Buying life insurance is a great way to protect the people you love.
  • Though some life insurance companies check applicants' credit records, that shouldn't impact your actual credit score.

Here's what you need to know if you'll be looking into a policy.

Purchasing life insurance is important if you have people in your life who depend on you financially, like the children you support with your income. But even if you don't earn any money, it could still pay to put a life insurance policy in place.

Say you're a stay-at-home parent who looks after your young kids so your spouse can work. If something were to happen to you, your spouse would be left in the lurch financially as a result of not having childcare.

If you're interested in applying for life insurance, you may be wondering how that process will impact your credit score. This especially holds true if you also have plans to apply for another large loan, like a mortgage, in the near term.

The good news, though, is that applying for life insurance shouldn't impact your credit score at all. This holds true even if the company you apply with decides to dig into your credit.

Life insurance and your credit score

Some life insurance companies don't perform a credit check on applicants. If that's the route yours chooses to take, then applying for coverage shouldn't cause your credit score to change at all.

But a growing number of life insurance companies are doing credit checks as part of the application process. And that can be a good thing and a bad thing.

If your credit is strong, it could potentially help you save money on life insurance premiums. Poor credit, on the other hand, could serve as a red flag and result in higher premium costs.

Either way, if a life insurance company pulls your credit report to check up on your financial picture, it will be considered a soft inquiry. And soft inquiries don't cause your credit score to change the way hard inquiries might.

A hard inquiry on your credit report will happen any time you apply to borrow money, whether via a mortgage, auto loan, personal loan, or credit card. A hard inquiry will typically result in a minor hit to your credit score -- somewhere in the ballpark of five to 10 points.

A single hard inquiry won't cause much damage, but multiple hard inquiries within a short time frame could cause a more notable drop in your score. But thankfully, that's not something you have to worry about when you apply for life insurance.

Get that ball rolling

Life insurance is something that's pretty easy to put off. After all, the process of applying can be a bit time-consuming, and those premiums may be something you'd prefer to avoid paying for just a bit longer. But you never know when tragedy might strike, so it's important to have that protection in place. If you haven't yet started that legwork, it pays to get moving sooner rather than later.

The good news is that you can easily apply for life insurance at the same time as another loan without having to worry about any credit score impact. So don't let the fact that you're, say, trying to buy a car or home serve as motivation to delay that life insurance application even further.

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