How your credit score can affect your homeowners insurance rates

Your credit score helps homeowners insurance companies determine the risk of insuring your home and how high or low your insurance premiums will be. Insurers look at a number called a credit-based insurance score.

Just as a bank will check your credit score before loaning you money for a home or car, homeowners insurance companies run their own version of a credit check to see how much of a risk you’ll be to insure. If you have a good credit score, your carrier may view you as a “low-risk insured” and charge you less in insurance premiums. Conversely, if your credit score is bad, you’re viewed as riskier to insure and therefore you’ll generally pay more in homeowners insurance premiums. Why is that?

The reasons are twofold: your credit score is indicative of both your ability to make a timely insurance payment and your likelihood of filing a homeowners insurance claim. Insurance companies have found that credit and insurance claim frequency are directly correlated with one another. Homeowners who have a history of credit issues are generally more prone to file claims than homeowners with unblemished credit, and because of that, are typically charged higher rates.

The credit check that your insurance company runs is less extensive and pries less into your financial background than a normal credit check. What the insurance company looks at is known as your insurance score, or your credit-based insurance score. Your insurance score is a calculation of some (but not all) factors in your credit history as a way to measure how risky you’ll be to insure.


  • Before insuring your home, insurance companies will consider multiple factors, including certain parts of your credit score

  • Also known as your credit-based insurance score, this number helps insurers determine how likely you are to file an insurance claim

  • According to industry research, your credit-based insurance score is directly correlated with how likely you are to experience a loss

  • The higher your credit-based insurance score, the lower your rates will be

In most states, it is perfectly legal for insurance companies to use credit-based insurance scores as a factor — but not the sole basis — for increasing your insurance rates or denying, canceling, or not renewing your policy.

Just two states (California and Massachusetts) ban the use of credit-based insurance scores altogether, and two states prohibit the use of insurance scores for specific types of insurance (Hawaii for auto insurance and Maryland for homeowners insurance), according to the American Property Casualty Insurance Association.

Why your credit score impacts your homeowners insurance rates

After you apply for homeowners insurance, there are a couple processes that happen behind the scenes before your policy goes active or in force.

There’s underwriting, which is when the insurance company assigns you a risk designation (how high or low risk you are to insure) based on multiple factors, including your credit-based insurance score. (Companies can also straight up deny your application for homeowners insurance during the underwriting stage.) Then there’s the rating portion, which is when the insurance company sets your insurance premiums based on what was discovered during underwriting.

While it may be confusing to some why credit scores can so drastically impact insurance premiums, research has shown that there’s actually a correlation between certain credit characteristics (those that are included in your insurance score) and insurance losses, according to the National Association of Insurance Commissioners.

The thinking goes that if you have good financials and a good credit score, that means you’re staying on top of your mortgage payments and maintaining the property — making necessary repairs and providing upkeep when need be. A bad storm will probably pose less of a risk to a home that’s well taken care of and structurally sound than one that isn’t. In the insurer’s eyes, all of these factors are interconnected.

On the flip side, homeowners with a poor credit-based insurance score are more likely to have outstanding debt and are viewed as more likely to depend on an insurance payout in the event that something bad happens.


Get the right advice, right here.

No sweaty sales pitches. Just unbiased advice from licensed experts.

What is included in a homeowners insurance score?

Unlike the regular credit score that is used to measure how likely you are to repay a loan or a line of credit, a credit-based insurance score measures how likely you are to file an insurance claim.

There are several different companies that provide insurers with insurance scores, and each company calculates that number a little differently. According to the NAIC, your FICO credit-based insurance score is based on five key areas with varying weights:

  • Payment history (40%) - How well you’ve been able to pay off outstanding debt in the past

  • Outstanding debt (30%) - How much debt you currently have

  • Credit history length (15%) - How far back your open lines of credit go

  • Pursuit of new credit (10%) - If you’ve applied for new lines of credit recently

  • Credit mix (5%) - The kinds of credit you have open (mortgage, student loans, auto loans, etc)

Is it possible to get homeowners insurance with bad credit?

As we touched on earlier, insurance companies are permitted to use credit-based insurance scores as a factor in denying or canceling your policy, but it can’t be the sole reason. So yes, generally speaking, you can have bottom-of-the-barrel credit and still get insured.

However, keep in mind that having a bad credit score (and therefore a bad insurance score) creates another obstacle to getting your home insured. If you have a history of frequent claims and an older home (two characteristics that could be marked as “high risk” during underwriting), having a bad insurance score on top of that could make it harder for you to get homeowners insurance on the private market. Additionally, even if you’re able to get coverage, having bad credit can increase your insurance premiums as your insurer will deem you high risk.

To improve your credit-based insurance score, be sure to pay all of your bills on time, only apply for lines of credit when necessary, and keep your credit utilization low on existing lines of credit. If you’re having trouble obtaining insurance on the private market, you can covered through your state’s FAIR Plan — a last-resort option for high-risk homeowners.

Homeowners Insurance Expert

Pat Howard

Homeowners Insurance Expert

Pat Howard is a homeowners insurance editor at Policygenius in New York City. He has written extensively about home insurance cost, coverage, and companies since 2018, and his insights have been featured on Investopedia, Lifehacker, MSN, Zola, HerMoney, and Property Casualty 360.

Was this article helpful?