Freezing Your Credit and How It Affects Your Insurance

February 12, 2019

This New England weather isn’t the only thing freezing these days. You may have heard an increasing amount of chatter around “freezing” your credit. We will outline below what this means, why you might consider it, and how it can impact your insurance.

What is a Credit Freeze?

A credit freeze allows you to restrict access to your credit report and prevents the three major credit reporting agencies from providing your report or credit score to creditors. The “freeze” helps eliminate the possibility of identity thieves opening new accounts in your name since before most new accounts (such as loans or other forms of credit or revolving accounts) are approved, a creditor will want to see your credit report.

Why should I freeze my credit?

Several major data breaches have led to a growing concern about the safety of our personal and financial information. While many companies have offered reactive services in the aftermath of a data breach, it may too late for those with compromised data. Taking a proactive measure, like freezing your credit, decreases your likelihood of becoming a victim. In fact, new federal law has required that freezing and unfreezing your credit be free of charge so that consumers are not faced with barriers to this protective measure.

Does my credit history play a role in my insurance rates?

The short answer is, it can. Most states can use your credit score when determining your insurance rates (laws passed in California, Hawaii and Massachusetts expressly prohibit the use of your credit score in underwriting while some other states only allow your credit score to be used to discount but not increase your rates). The higher your credit score the more likely you could benefit from discounts. If your credit is frozen your insurer may get a “no hit” when they try to obtain your credit score and appear that you have no credit history. Your assumed lack of credit history could result in higher premiums.

Will a credit freeze affect my insurance?

It doesn’t have to. If you are looking to add an insurance policy or switch an existing policy, you may want to unfreeze your credit for a brief period of time to allow the insurers access to your credit history or credit score. Check with your independent agent to determine if a credit check will be required in the underwriting process. Similarly, you should consult with your independent agent about unlocking your credit prior to having your renewal remarketed. Be sure to let your independent agent know that you have frozen your credit so they are aware and can give you time to unfreeze it before the underwriting process begins if necessary.

Being proactive with the increasing vulnerability of our personal information is something worthy of consideration and can certainly provide some piece of mind. If you have questions about how this can impact your insurance be sure to reach out to one of our trusted Brooks, Todd & McNeil independent agents.