Is Your Poor Credit Causing You To Pay More For Your Home Owners Insurance?


Most people understand the importance of maintaining a good credit score. This practice will assist you in being able to obtain attractive loan rates, excellent credit card deals, and more negotiating power. Along with all of these perks, many insurance companies are also using credit based insurance scores to determine how much you will pay for your homeowners insurance. What is a credit based insurance score, and how much of an effect is it having on your premium? You may be surprised. 

What Is A Credit-based Insurance Score?

Your credit score is not the same as your credit-based insurance score, but both are derived from some of the same information. This is the information that is contained within your credit report. Insurance companies look at many different things on your credit reports. These include:

  • Payment histories
  • Bankruptcies
  • Collections
  • Types of credit being used
  • Amount of outstanding credit
  • Length of your credit history and more

This information is fed into computer programs that are then able to assign you a credit-based insurance score. This score is then used as a predictor of what type of insurance customer you will be and the amount of risk that you potentially pose for the insurance company. The lower your score, the higher the risk you pose for the company. This includes the number of potential claims you may file, as well as the size of the claims. The higher the risk you pose, the higher your homeowners premiums may potentially be.

How Much Will Poor Credit Cost You?

Although not every state uses credit based insurance scores to determine your rate, homeowners in states that do can see substantial increases if they have poor credit. It is estimated that in approximately 38 states and Washington, DC, affected homeowners can pay as much as double the amount they would have to pay if they had good credit. Some of the highest rate increases are found in the following areas.

  • West Virginia - 202% increase
  • Washington, DC & Ohio - 185% increase
  • Montana - 179%

There are three states that ban the practice of setting your homeowner rates this way. These three states are:

  • California
  • Massachusetts
  • Maryland

Florida does not ban the practice but does set limits on how much the insurance company can charge you.

How To Avoid Premium Increases Due To Credit

Not every insurance company uses credit based insurance to determine their rates. If you feel that your homeowners insurance is higher than it should be, shop around for a better rate.

You can also increase your credit-based insurance score along with your credit score by paying your bills on time and wisely managing your credit. If you get behind on your payments, make contact with those you owe and make arrangements to get caught up.   


19 January 2016

Finding The Right Homeowners Insurance Plan

Once I purchased a new home, I realized that it would be important for me to find a great homeowners insurance plan. I talked with my broker, and they have nothing but nice things to say about one company that offered excellent homeowners coverage. I purchased a policy and moved into my home. A few months later, I realized that my place was flooding, and it was really scary. Fortunately, my homeowners insurance covered the damage, and they took care of the repairs. This blog is all about the benefits of professional homeowners insurance, so that you aren't left without coverage.