If you're doing the arbitrage thing, and because of it, your credit score has taken a hit, can it increase how much you're paying in insurance premiums?
I didn't have an answer for this — a suspicion, yes, but no answer — so I made a few phone calls. According to the person I spoke with at Farmers Insurance, the way credit ratings are handled varies with each insurance company.
In the case of Farmers, they will only take your credit rating (it's scored not in the usual manner, but on a scale of A - B - C - D - E) into account on a couple of occasions. This would be when you (1) initiate a policy, or (2) make a change to a policy. They do not check the insured's credit rating when policies simply renew (usually annually or semiannually).
Just for fun, I went ahead and called an Allstate agent also. When asked how often Allstate would take into account an individual's credit rating — their scoring system is called "IFS," and it looks at more than just someone's credit score — this agent responded that Allstate only takes it into account when new business is opened; i.e., upon initiation of a new policy. He told me that their system can initiate an IFS check every two years on current policyholders, but that he has never seen anyone's policy premiums automatically adjusted by the system.
So, as best I can tell, as far as your insurance premiums are concerned, there's not much need to worry about your credit score being wounded from a credit-card arbitrage play. That's unless, of course, you're going to be (1) initiating a new policy, or (2) changing your current one in the near future.
It's worth noting that each insurance company handles credit ratings differently, so it might not hurt to ask yours about their policies before you undertake any potentially-FICO-damaging activities.
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Labels: Credit Cards
