Most people associate a credit check with applying for a loan, renting an apartment, or getting approved for a new credit card. But what many don’t realize is that credit-related information can also play a role in life insurance underwriting — although not in the way you might expect.
When applying for life insurance, especially policies like Indexed Universal Life (IUL), your eligibility and pricing are primarily based on health and lifestyle risk — not your credit score. However, some insurers do use credit-based insurance scores as part of their risk assessment. In this article, we’ll explore how credit checks intersect with insurance underwriting, when they matter, and what they mean for your application and long-term coverage.
Do Life Insurance Companies Perform a Credit Check?
The answer is both yes and no. Most life insurers do not pull your FICO score like a bank or credit card company would. However, many carriers use a related tool called a credit-based insurance score — a proprietary rating based on credit report data, not designed to evaluate creditworthiness but to assess risk-related behavior.
This process is known as a “soft inquiry” — meaning it doesn’t impact your credit score, nor does it appear on your credit report as a credit-seeking activity.
What Is a Credit-Based Insurance Score?
Developed by analytics firms like LexisNexis and TransUnion, a credit-based insurance score uses certain elements of your credit report to assess your likelihood of maintaining coverage, making on-time payments, or posing a higher insurance risk.
Factors typically included:
- Payment history (late payments, collections)
- Credit utilization ratio
- Number of open accounts
- Recent inquiries (though not counted heavily)
- Length of credit history
Factors not included:
- Your income
- Your race, ethnicity, or gender
- Your job title or employment history
The idea is that responsible financial behavior correlates with responsible insurance behavior — like keeping your policy in force and avoiding lapses.
How Credit Checks Influence IUL Insurance Applications
In an Indexed Universal Life (IUL) policy — where flexibility, longevity, and funding discipline are key — insurers want to assess whether an applicant is likely to:
- Maintain premium payments over the long term
- Avoid frequent loans or early policy surrenders
- Engage in financial behaviors that suggest stability
A favorable insurance-based credit score can result in:
- Faster application approval (especially with automated underwriting)
- Eligibility for higher face amounts or better internal costs
- More flexible options for premium schedules
In contrast, a poor credit profile might lead to slower processing or require more manual underwriting — but it won’t automatically disqualify you if your health profile is strong.
Does a Bad Credit Score Hurt Your Life Insurance Chances?
Not necessarily. Your credit score is one small piece of a much larger underwriting puzzle. Insurers weigh your:
- Medical history and exam results
- Family health history
- Age and gender
- Nicotine/tobacco use
- Occupation and hobbies
- Driving record
So if you’re otherwise healthy and present a low mortality risk, your credit score — even if less-than-perfect — may have minimal or no impact on your final offer.
States That Restrict Credit Check Use in Insurance
Some U.S. states have restricted or regulated the use of credit-based insurance scoring in underwriting to protect consumers. For example:
- California, Hawaii, and Maryland — prohibit or heavily restrict the use of credit history in some insurance lines
- Oregon and Vermont — allow its use only for pricing, not eligibility
Be sure to check your state’s insurance laws or ask your advisor how local regulations affect underwriting in your region.
Policy Loans, Credit History, and Access to Cash Value
One major advantage of IUL and whole life policies is access to policy loans — borrowing against your cash value. The best part? No credit check is required.
These loans are:
- Tax-free if structured correctly
- Issued quickly, with no lender approval
- Collateralized by your policy’s own value
This makes life insurance a powerful financial tool, especially for those who might struggle with traditional credit access.
What to Do Before Applying
If you’re concerned that your credit history might influence your life insurance application, consider these steps:
- Check your credit reports from Equifax, Experian, and TransUnion
- Dispute any errors before applying
- Pay down high-utilization accounts to improve ratios
- Work with an independent agent who can shop multiple carriers — some don’t use credit scoring at all
Don’t Let a Credit Check Deter You
While a credit check may be part of the background underwriting process, it’s rarely the deciding factor in life insurance approval — especially for policies focused on your health and longevity, like Indexed Universal Life.
If your financial history isn’t perfect, don’t be discouraged. With the right planning and guidance, you can still secure powerful, lasting protection — no cosigner, no hard inquiry, and no financial gatekeeping required.
Pro Tip: You can ask your insurance agent upfront whether the carrier uses a credit-based insurance score — and how it might impact your application.