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How does my credit score affect my home insurance rates?

Credit Scores & Home InsuranceYour credit score does affect your home insurance rates. Even though it is a more recent development (within in the past ten years), your credit score can definitely affect how much you pay for many kinds of insurance, including home insurance.

Insurance companies look to your credit score to help determine what kind of “risk client” you may be. If your credit is good, the companies typically see you as low risk and, as such, you get lower rates.

The inverse is also true: insurance companies may feel you are a high-risk client if you have a bad (or even not-so-good) credit score, and this can affect not only the premium they offer you, but in some cases it can also affect whether or not they decide to insure you at all.

Is it even legal to use credit scores when calculating home insurance rates? What things can one do to get the best home insurance rates even with a bad credit score? Why do insurance companies even care about credit scores when determining homeowners insurance premiums?

To learn all about credit scores and homeowners insurance premiums then read on. Also, be sure to enter your zip code above to compare free insurance rates!

The Debate on Credit Scores and Insurance Premiums

There is a lot of debate over this issue, as many people do not necessarily understand the correlation between insurance rate and credit score.

They wonder, for example, the logic behind how someone with a bad or not-so-good driving record could get a lower car insurance rate than someone with a mediocre credit score. Some believe that insurance rate should be based only on the condition of the actual home, and say there is no correlation at all.

On top of that, many of us have always had the understanding that our homes are our most important investments and that, in moments of financial crisis, it is crucial that we protect those investments. Sometimes this may mean that we have to make difficult decisions in prioritizing our bills.

You would think that having a credit score that is lower at the expense of staying on top of home or insurance payments would indicate your level of commitment to your home. But it doesn’t always work this way.

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Studies Tie Credit Scores to Responsibility

The truth is that enough of a correlation has been found between someone’s financial history and the likelihood of future insurance loss and that is risk enough. In the end, there is not much more to do other than try to stay on top of our debt as best we can.

Not all companies use credit scores to determine your rates, and not all states allow insurance companies to use your credit score to determine your home insurance rate, so that is something you can usually verify before purchasing home insurance.

However, a vast majority of insurance companies and states do consider your credit score (and several countries, as well), which makes this a very important issue to think about and look into. In some places, a bad credit score can mean a doubling of your insurance rates.

In general, insurance providers, just like credit providers, consider people who pay all their bills on time as more stable. Maxed out credit cards, or repeated late payments, are seen as indications of risky behavior, and this leads to higher premiums on home insurance. Insurance companies use credit scores to determine how fiscally responsible a person is. It is all about determining risk, so you’ll want to always be clear about what your credit score is.

You are allowed one free annual credit report a year, and should take advantage of it. Analyzing your credit report does help you determine your score, but it can also help you as you try to decide how you will improve your score. Also, it can illuminate mistakes—perhaps a credit card company has recorded your credit limit as lower than it actually is.

This kind of thing affects your credit score, but companies can and will quickly fix this, should the problem arise. Keep in mind that insurance companies tend to be more concerned about your overall credit history than analyzing every instance you’ve applied for credit.

Actions to Take to Lower Homeowners Insurance Premiums

Of course, raising your credit score is a great move toward getting lower premiums. Until that happens, ask you insurer about discounts for safety and security features added to your home.

Finally, make it a point to compare your home insurance premium and policy with offers from other providers. Use our free rate quote tool at least once a year to see if you can find a better deal.

Your credit score will almost certainly affect your home insurance rate. What kind of home insurance rate will you get? Use the home insurance quote tool to see how your credit score will affect your rate now!

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