How Your Credit Score Affects Your Home Insurance Rates
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There’s a reason why insurance rates aren’t universal; insurers use many variables to generate your homeowner’s premiums, such as credit history. Insurance companies examine your financial history for things like whether you have a lot of debt or frequently make late payments/miss paying your bills. This information forms your credit-based insurance (CBI) score.
Your CBI score is a personalized score that allows insurers to set your premiums. This is a good thing because if you’re meticulous at paying your bills on time and have a manageable amount of debt, you wouldn’t want to pay the same rates as someone with less than stellar credit history. In fact, if you have a great credit score, it could shave 20% or more off your premiums.
CBI scores are used to help set premiums because insurers have found a link between a policyholder’s CBI scores and their likelihood of filing homeowners insurance claims. For instance, a homeowner who maintains their home decreases the likelihood of storm damage to their property, so they are less likely to file a claim.
In a nutshell, the better your credit history, the lower your insurance premiums.
Not every state permits insurance companies to base their premiums on your credit history. The states that do not allow insurance companies to use CBI scores to determine your homeowner’s insurance rates include:
These states still use a variety of factors to determine your insurance premiums, just not your credit score.
If you live in a state that allows insurers to use CBI to determine your premiums, whether your credit score is low or high-risk, your credit history will affect your rates. If you are considered low-risk because of a good credit score, your rates will be lower than someone who is high-risk.
So, be sure to shop around as every insurance company uses different modeling to generate premiums. Then, once you have a few quotes, you’ll be able to select the best policy for you, whether that’s the lowest rates or a more comprehensive plan.
Jessica Fox Jessica Fox has been a freelance writer for five years, with a specialty in health, wellness, and insurance. During this time, she’s written for some of the biggest B2B and B2C brands from around the world. Jessica is also the mother of two young daughters and loves coffee, writing, and working out.
