How Credit Scores Affect Your Homeowners Insurance Quote

 

How Credit Scores Affect Your Homeowners Insurance Quote

📌 Table of Contents

What Is a Credit-Based Insurance Score?

Your credit-based insurance score is a numerical value based on information in your credit report.

Unlike traditional credit scores used by lenders, this score is used by insurance companies to assess risk.

It helps insurers predict how likely you are to file a claim.

Major factors include payment history, outstanding debt, credit history length, and types of credit used.

According to the Insurance Information Institute, around 95% of auto insurers and 85% of homeowners insurers use credit-based scores in states where it’s allowed.

Why Do Insurers Use Credit Scores?

Insurers argue that credit behavior strongly correlates with claim frequency and severity.

Statistically, individuals with higher credit scores tend to file fewer and less expensive claims.

By using credit scores, insurers believe they can price policies more fairly and predictably.

This means policyholders with better credit may receive lower premiums.

Conversely, those with poor credit might be considered high-risk and face higher rates.

How Credit Scores Affect Your Premium

Your credit score can significantly affect your homeowners insurance quote.

According to a 2023 report from The Zebra, homeowners with poor credit can pay over twice as much for coverage compared to those with excellent credit.

For instance, someone with excellent credit may pay $1,300 annually, while someone with poor credit could pay over $2,800.

This difference makes understanding and improving your credit score crucial.

States with Restrictions on Credit Use

Not all states allow insurance companies to use credit scores in setting rates.

California, Maryland, and Massachusetts prohibit the use of credit-based insurance scores in underwriting homeowners insurance policies.

Other states, like Washington, have implemented temporary bans or restrictions, especially during emergencies like COVID-19.

If you live in a state with such restrictions, your credit score won’t influence your homeowners insurance rate.

Tips to Improve Your Score and Lower Your Rate

Improving your credit score can lead to significantly lower insurance premiums.

Here are a few practical tips:

  • Pay all your bills on time—payment history makes up 35% of your FICO score.

  • Keep credit card balances low to maintain a good credit utilization ratio.

  • Limit new credit inquiries; too many applications can hurt your score.

  • Check your credit report for errors and dispute any inaccuracies.

These actions don’t just help your insurance rates—they benefit all areas of your financial life.

Get Your Free Credit Report

You’re entitled to one free credit report each year from each of the three major bureaus—Experian, Equifax, and TransUnion.

Reviewing your reports is a smart way to understand what insurers might see.

You can get your free reports through the official U.S. government website below.

🔍 Get Your Free Credit Report Now

Regularly checking your credit can alert you to fraud, identity theft, and mistakes that could cost you money.

Understanding how credit scores affect your homeowners insurance quotes is essential.

Whether you’re shopping for a new policy or trying to lower your current rate, improving your credit can lead to tangible savings.

Make informed choices today to protect both your home and your wallet tomorrow.

Keywords: credit score, homeowners insurance, insurance quote, improve credit, insurance rates