How to Get Home Insurance With Bad Credit

In most states, your credit-based insurance score is one of the factors used by homeowners insurance providers to determine your annual premium. Your insurance credit score is distinct from your regular credit score, which is used by lenders to determine credit eligibility. However, because it is based on information from your credit report, if you know you have bad credit, your credit-based insurance score is likely to be low as well. If this is the case, you may have to pay higher-than-average premiums. However, even with bad credit, it is possible to obtain home insurance.

Cost of home insurance with low credit

Because there is a correlation between an individual's credit-based insurance score and the likelihood of filing a claim, insurance providers typically charge people with low scores higher rates. In states where it is legal, 85 percent of homeowners insurance providers use your insurance credit score. If your credit-based insurance score is extremely low, your premium amount may be doubled. However, many other factors influence your premium amount, and some insurance companies place a higher value on credit information than others. You should shop around for the best deals.

Credit score vs. home insurance score

Insurance providers use your credit-based insurance score to determine the likelihood that you will file a claim, whereas creditors use your regular FICO score to determine the likelihood that you will default on your payments. While both scores are based on the same criteria, each insurance company calculates your insurance credit score differently, so the weighting of that information varies.

Another distinction is that, whereas lenders frequently use a hard credit check to determine your interest rate, insurance providers assess your credit-based insurance score using a soft inquiry. So, if you've ever wondered, "Do home insurance quotes affect credit score?" No, it does not. You can obtain quotes from multiple insurers without impacting your credit.

How do I know my credit-based insurance score?

You cannot look up your credit-based insurance score because each insurance company generates a score for you based on different criteria in your credit report. AnnualCreditReport.com, on the other hand, will provide you with a free copy of your credit report. This can assist you in determining whether your insurance credit score needs to be improved. Correcting errors on your credit report may also improve your credit-based insurance score. If you have a high insurance score, you will pay much less for home insurance.

What impacts my home insurance credit score?

Your credit-based insurance score is calculated using the following factors:

• Payment history: Home insurers will look to see if you have a history of making on-time payments or if you struggle to pay your bills. The idea is that homeowners who can make their payments on time are more likely to keep their homes and avoid risk. This is a critical factor in determining your insurance credit score.
• Debt balance: The amount of debt you have outstanding is also checked by insurers because it indicates your level of financial security.
• Credit history length: Insurers want to know how long you've had credit.
• Recent credit applications: Your recent credit applications can have an impact on your insurance score, but they are not weighted as heavily as other factors.
• Credit mix: This metric assesses your ability to manage various types of loans (like a mortgage, auto loan, student loan or credit card). In most cases, it is the least important factor in determining your credit-based insurance score.

Different behaviors can have a positive or negative impact on your insurance-based credit score.

Does my home insurance credit score determine my home insurance rate?

Unless you live in California, Massachusetts, or Maryland, most home insurers will base your rate on your credit-based insurance score. However, keep in mind that this is only one of many factors considered when determining your premium. Your location, marital status, claims history, the cost to replace your valuables, the construction and condition of your home, certain risky features such as a swimming pool or wood-burning fireplace, and even the breed of your dog are all taken into account. You can also influence your home insurance rate by increasing your deductible or decreasing your coverage limits. Even so, if you have bad credit, you should expect to pay more.

How can I improve my credit score for cheaper home insurance?

Our mission at CompareInsurance is to provide you with the resources you need to live a frugal lifestyle and achieve financial stability. As a result, we've compiled the steps required to improve your home insurance rate — steps that are also critical to your overall financial health. Here are a few strategies for improving your credit-based insurance score:

• Examine your credit report and file a dispute if there are any errors.
• To avoid future defaults, set up automatic payments.
• Pay off as much debt as you can, but keep any old accounts open.
• Request a higher credit limit.
• Avoid making too many new credit applications.
• Become an authorized user on the account of a creditworthy friend or family member.