Home » How Your Credit Score Affects Your Homeowners Insurance
February 20, 2016

How Your Credit Score Affects Your Homeowners Insurance

Homeowners insurance is necessary for any homeowner. Even if you live in a safe area, you never know what could happen to your home. From fires to hurricanes, there is a host of catastrophic events that can damage your home that are outside of your control. Since your homeowners insurance policy is important to your family’s well-being, it’s important to understand how your credit score affects your policy.
Credit Scores Help Determine the Rate of Your Insurance Policy

If your credit score is less than stellar, you could end up paying significantly more for your homeowners insurance policy. With a lower credit score, you will likely have an unfavorable insurance credit score, which helps determine the rate of money you pay for your insurance. Even with a score that is average, you may pay a premium for your insurance policy, which may mean you will pay hundreds more annually for your insurance. With a lower credit rating and a lower insurance credit score, many insurance companies:

  •          See you as a risk
  •          Find it likely you will file a claim
  •          Transfer risks to you in the form of higher                    insurance rates

Determining your insurance credit score is different for each company. Some factors insurance companies may consider include your payment history, the type of accounts you have (mortgages, revolving debt etc.) and how long you’ve had credit. As a homeowner, you want to be less risky to insure in order to get the best rates for your insurance policy.

Why Does Your Credit Score Matter?

Consumers may not see the correlation between credit scores and insurance risks, yet studies show that there is a strong correlation between a lower credit score and an increased risk for the insured to file a claim. Where legally possible, 92 percent of all insurance companies assess credit profiles to provide insurance quotes. In some states, the law prohibits the use of credit profiles to quote insurance rates.

How You Can Improve Your Insurance Credit Score

In order to get the best rate for your homeowners insurance policy, you should increase the positive aspects of your credit report. Doing the following may help lower the cost of your insurance:

  •          Pay off some debt
  •          Make your credit card payments on time
  •          Remove inaccurate information
  •          Allow your credit profile to age

The more positive accounts you have reported on your credit report, the more likely it is for you to reduce the cost of insuring your home. 

Although there are other factors considered when your insurance agent quotes you a policy for homeowners insurance, such as claims history, type of structure and the amount of the policy, you can improve how your insurance company views you credit-wise, which can help you lower the cost of your homeowners insurance. 

Still have questions? Call Cliff Cottam Insurance Services at 916-488-4426 for more information on Sacramento home insurance.

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