Why insurers want a credit check for insurance quotes

Not sure why an insurance company wants to run a credit check for insurance quotes? Checking your credit score for a home insurance quote is normal, but using a credit score to determine auto insurance premiums is not. In fact, using credit checks for auto insurance is banned in Ontario and Newfoundland and Labrador, but not for home insurance.

Seems pretty straight-forward, right? Here’s how it all works.

Why do insurance companies do a credit check for insurance quotes?

Credit scores are widely considered to be the single best indicator of risk from the perspective of an insurance underwriter.

“A credit score is a measure of your financial health, with 300 being the worst and 900 the best. It has traditionally been used by institutions to assess credit risk. Insurance companies argue that people who have strong credit scores will actually benefit.” – CBC.ca

The Insurance Bureau of Canada’s Code of Conduct requires insurance companies to consider factors beyond someone’s credit score, but it’s still a very credible and important factor in determining your coverage and premiums.

Why are credit checks for insurance quotes a good thing?

Great question! It’s illegal for Ontario’s insurance companies to increase your rates due to a low credit score. It’s also illegal for insurance companies to deny coverage to someone due to a low credit score. You’re protected from inflated rates or denial of coverage if your credit score could use some improvement.

Even better, you can actually get a better rate with a high credit score. Insurance companies love low-risk clients and they’re often willing to entice those clients with good rates. The connection to credit is that insurance underwriters consider a credit score to be the most accurate indicator of risk available.

Are there rules an insurance company must follow when doing a credit check?

Yes. The Code of Conduct for Insurers’ Use of Credit Information was created on December 14, 2010 with the primary goal of enforcing transparency when it comes to the use of credit checks for insurance quotes.

When an insurance company does choose to do a credit check for insurance quotes, it’s required to follow these rules for the protection of the consumer:

  • The company must obtain a customer’s informed and express consent prior to collecting credit information.
  • The company must not deny or cancel an insurance policy solely because the customer did not give them access to credit information.
  • The company must provide guidance for situations in which customers believe that their credit rating has been negatively affected by extraordinary events.
  • The company must create their rating and underwriting decisions based on other relevant information available to them when a customer does not have a credit history.

IBC’s Code is widely supported and endorsed by personal property and auto insurance companies across Canada; approximately 85% of insurance companies have adopted it.

What does “credit consent” mean?

As a consumer you can always exercise the right to say no to a credit check. Under the IBC’s Code of Conduct, insurance providers must obtain your express consent before looking into any of your personal credit information. That means they have to ask for your permission in straight-forward language.

Can I still get home insurance with a bad credit score?

Obviously, having a good-to-great credit score is only going to help you, but having a low credit score doesn’t prevent you from obtaining home insurance coverage. You can still get home insurance coverage even if you don’t agree to a credit check for insurance quotes.

Other home insurance underwriting factors could be given more weight if you opt out of the credit check—just be aware that you could miss out on potential rewards.

What is a soft credit check for home insurance?

When insurance companies do a credit check for insurance quotes, they do what is called a “soft credit check” (also called a soft credit pull). This is the act of reviewing your credit report and it also requires your express consent.

Pie chart dividing credit score factors by their weighted percent.

This is preferable to a hard credit check or inquiry, which is the act of checking a credit report in addition to making a new application for credit (such as applying for a mortgage).

You’ll want to be careful about the number of times you do a hard credit check, as frequent requests could negatively affect your total credit score. That’s why it’s better to get a soft credit check for insurance quotes.

What other factors are there besides credit check for insurance quotes?

Underwriters have plenty of other factors besides credit scores to calculate the cost of home insurance. In fact, it is only one of several factors that they consider. 

Underwriters can also also look at things like:

  • The value and age of your home.
  • Where your home is located.
  • What type of home you’re insuring (detached, townhouse, condominium, etc.)
  • The size of your property.
  • The cost to rebuild your property.
  • Your home’s susceptibility to inclement weather (tornados, hurricanes, flooding, ice storms, etc.).
  • The physical condition of the home.
  • Outdated or neglected systems in the home, like knob and tube wiring.
  • Distance from the nearest fire hydrant or fire hall.
  • Your age and marital status.

What if I don’t have a credit history?

If you don’t have a credit score, then insurance companies are obligated to form underwriting decisions on other information that is available to them, plain and simple.

You don’t need a credit check for insurance quotes at the end of the day—and underwriters are prohibited from using them to underwrite auto insurance policies—but it’s common with home insurance policies. Use your judgment to get the best rate available, depending how good your credit rating is.


At the end of the day, credit checks are a good thing for financially responsible Canadians. Having a “bad” credit score won’t prevent you from getting home insurance, but a good score could help you score a better home insurance rate than you’d otherwise get.

Seriously, what else can you do in 3 minutes?

Boil half an egg?

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