How to Get Home Insurance With Bad Credit

Your credit-based insurance score is one factor that homeowners insurance providers use when determining your annual premium in most states. Your insurance credit score is different from your regular credit score, which lenders use to determine your credit eligibility. However, it’s based on your credit report’s information, so if you know you have bad credit, it’s likely your credit-based insurance score is also low. If that’s the case, you could face higher-than-average premiums. But it’s still possible to get home insurance with bad credit.

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      Cost of home insurance with low credit

      Because there’s a correlation between an individual’s credit-based insurance score and the likelihood to file a claim, insurance providers typically charge higher rates to people with low scores. 85% of homeowners insurance providers use your insurance credit score in states where they are legally allowed to do so. If your credit-based insurance score is really low, it can even double your premium amount. However, many other factors also determine your premium amount, and some insurance companies weigh credit information more heavily than others. To get the best rates, you should shop around.

      [ Next: The Average Cost of Home Insurance ]

      Credit score vs. home insurance score

      While creditors use your regular FICO score to determine the probability that you’ll default on your payments, insurance providers use your credit-based insurance score to determine the likelihood that you’ll file a claim. While both scores are taken from the same criteria, each insurance company calculates your insurance credit score differently, so the way that information is weighted varies.

      Another difference is that while lenders often use a hard credit check to determine your interest rate, insurance providers use a soft inquiry when assessing your credit-based insurance score. So if you’re wondering, “Do insurance quotes affect credit score?” The answer is no. You can safely get quotes from multiple insurers without impacting your credit.

      [ Read: Understanding Home Insurance Quotes ]

      How do I know my credit-based insurance score?

      Since each insurance company generates a score for you based on different criteria in your credit report, you can’t look up your credit-based insurance score. However, you are entitled to a free copy of your credit report from AnnualCreditReport.com. This can help you estimate whether your insurance credit score needs improvement. Additionally, correcting errors on your credit report may raise your credit-based insurance score. If your insurance score is high, you’ll pay much less for home insurance.

      What impacts my home insurance credit score?

      The following factors go into calculating your credit-based insurance score:

      • Payment history: Home insurers will check to see whether you have a history of on-time payments or whether you struggle to pay bills. The idea is that homeowners who can keep up with their payments are more likely to maintain their homes and avoid risk. This is one of the most important factors in determining your insurance credit score.
      • Debt balance: Insurers also check the amount of debt you have outstanding since this indicates your level of financial security.
      • Length of credit history: Insurers want to know how long you’ve had credit.
      • New applications for credit: Your recent applications for new credit can also impact your insurance score, but this is not weighted as heavily as other factors.
      • Credit mix: This measures your ability to handle different types of loans (like a mortgage, auto loan, student loan or credit card). It’s typically the least important factor in determining your credit-based insurance score.

      Different behaviors can impact your insurance-based credit score positively or negatively. 

      Positive impact
      Negative impact
      Paying your bills on time

      Using a small percentage of your available credit

      Having a long credit history

      Having a mix of types of credit
      Having many recent applications for credit

      Having a short credit history

      Having late payments or delinquent accounts

      Holding a lot of debt

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

      Unless you live in California, Massachusetts or Maryland, most home insurers will use your credit-based insurance score to determine your rate. However, it’s important to keep in mind that this is only one of many factors used to determine your premium. Other factors considered are 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 your dog’s breed. Furthermore, you can influence your home insurance rate by raising your deductible or lowering your coverage limits. Still, you should expect to pay more if you have low credit.

      [ See: The Best Homeowners Insurance Companies ]

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

      At The Simple Dollar, our mission is to provide you with the tools you need to live a frugal lifestyle and achieve financial stability. For that reason, we’ve compiled the steps necessary to improve your home insurance rate — these steps are also essential to your financial health in general. Here are a few strategies you can use to increase your credit-based insurance score:

      • Check your credit report and dispute any errors
      • Set up automatic payments to avoid future default
      • Pay off as much debt as you can, but don’t close any old accounts
      • Ask for a higher credit limit
      • Avoid too many new applications for credit
      • Become an authorized user on a creditworthy friend or family member’s account

      [ Read: How to Raise Your Credit Score ]

      We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

      Lindsay Frankel

      Contributing Writer

      Lindsay Frankel is a Denver-based freelance writer. She regularly contributes to several personal finance publications, including LendingTree and FinanceBuzz. When she’s not writing, you can find her enjoying the great outdoors with her rescue pup, playing music, or listening to audiobooks.

      Reviewed by

      • Nashalie Addarich
        Nashalie Addarich
        Insurance Editor

        Nasha Addarich is an editor at The Simple Dollar and a former attorney who specializes in home insurance, auto insurance, life insurance, and savings. She is a former contributing editor to Reviews.com.