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Getting Renters Insurance With Bad Credit
You might be surprised to find out there’s a credit check for renters insurance. For better or worse, your credit score impacts more than just your interest rate on a loan — it can also impact your insurance premiums. Unless you live in a state that prohibits insurers from adjusting your premium based on your credit score, it’s likely that your credit score will impact your renters insurance rate.
That doesn’t mean you should avoid renters insurance if you have bad credit; you’ll likely still be able to find an affordable policy. Renters insurance is the cheapest type of coverage you can buy. And while it’s not legally required like auto insurance, many landlords require proof of renters insurance. Even if your landlord doesn’t mandate it, renters insurance is definitely worth the cost.
Will my credit impact my renters insurance premium?
Yes, but the extent to which your credit influences your rate varies from one provider to the next. Insurance companies will also consider your belongings, location and claims history, among other factors, when determining your premium.
If you have poor credit, you should compare quotes across insurance companies to see which provider can offer you the best deal. The best renters insurance companies also offer discounts that may offset a higher premium due to bad credit. For example, you might be able to save by paying your bill annually or bundling your renters policy with your car insurance.
The average cost of renters insurance is just $180 annually, so even a steep premium hike won’t make it unaffordable for most people. You may also be able to get a lower rate if you opt for a higher deductible.
[Read: How Much Renters Insurance Do I Need?]
Will a credit check for renters insurance affect my credit score?
No. When you apply for a loan, the lender will typically run a hard credit inquiry, which will temporarily decrease your credit score by five to 10 points. But when you apply for renters insurance, the insurance provider performs a soft inquiry. Soft inquiries don’t impact your credit score. Other examples of soft inquiries include checking your own credit score or prequalifying for a financial product.
What are insurers looking for in your credit?
Unlike lenders, who use your credit score to predict the likelihood of repayment, insurance providers aren’t interested in your ability to pay your bill. If you don’t pay for your coverage, your insurance company can simply stop providing it. In fact, insurance companies don’t use your FICO or VantageScore when determining your premium, but rather your credit-based insurance score. This score is also derived by your credit report, but it’s different from the score that lenders use.
Insurance companies are looking for credit information that might indicate your likelihood of filing a claim since some studies have concluded that people with poor credit tend to file more claims. Insurers evaluate factors such as your outstanding debt, payment history, length of credit history, and whether you have any bankruptcies or accounts in collections. This is a way for insurance companies to evaluate the risk of covering you. 95% of all U.S. insurance companies pull an applicant’s credit-based insurance score in underwriting their policy.
Is there any renters insurance company that won’t run my credit?
Unless you live in a state that doesn’t permit the use of credit score data in determining premium amounts, you’re out of luck. No credit check renters insurance doesn’t exist in most states. While you can’t get renters insurance with no credit check, you can take steps to raise your score. Check your credit report and dispute any errors, work on paying off any debt and sign up for Experian Boost to build credit from paying your utility and telecommunications bills.
You should also compare rates for renters insurance since some companies weigh credit information more heavily than others. You could find a quote near the national average just by shopping around for the best deal.
[Read: How to Raise Your Credit Score]
If I have bad credit, should I get renters insurance?
Yes. Consider all the valuables you keep in your apartment. There’s your furniture, laptop, TV, phone, gaming systems, workout equipment and anything else that costs you a chunk of change. If any of those items are stolen or damaged, you’ll have little recourse without renters insurance. For less than a dollar a day, you can be protected against those losses up to the limits in your policy.
Renters insurance can also provide you with the funds to get alternative housing if your apartment becomes uninhabitable. The best renters insurance policies also include liability coverage in case someone is injured in your home or by your pet — you won’t be on the hook for the medical bills.
What’s more, renters insurance is relatively cheap. A comprehensive auto policy can cost 10 times as much as a renters policy. Even if you have bad credit, you should be able to find an affordable rate. In most cases, your landlord will require you to purchase renters insurance since your landlord’s insurance won’t cover your belongings. Landlords also aren’t responsible for covering your accommodations if you can’t stay in your apartment due to water or fire damage.
For peace of mind alone, it’s worth it to purchase renters insurance. If you’re worried about the cost, choose a policy with a high deductible. You won’t be reimbursed for everything you own, but if you choose a deductible you can afford, you won’t be faced with unmanageable expenses either.