How your credit score can affect your homeowners insurance rates

People with high credit scores typically see lower rates on homeowners insurance — and vice versa.

Pat Howard 1600Kara McGinley

By

Pat Howard

Pat Howard

Senior Editor & Licensed Home Insurance Expert

Pat Howard is a senior editor and licensed home insurance agent at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

&Kara McGinley

Kara McGinley

Editor & Licensed Home Insurance Expert

Kara McGinley is an editor and licensed home insurance expert at Policygenius, where she writes about homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

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When you apply for homeowners insurance, the insurance company will run their own version of a credit check to determine how much of a risk you’ll be to insure. If you have a good credit score, your insurer may view you as a “low-risk insured” and offer you cheaper rates. Conversely, if your credit score is bad, you’re viewed as riskier to insure and therefore you’ll generally pay higher homeowners insurance premiums. 

Key Takeaways

  • Insurers consider multiple factors when determining your homeowners insurance premiums, including certain parts of your credit score.

  • Homeowners who have a history of credit issues are generally more prone to file claims than homeowners with unblemished credit — leading to higher rates.

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

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

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Does your credit score affect homeowners insurance rates?

Yes, certain parts of your credit score do affect homeowners insurance 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 your insurance score, or your credit-based insurance score. Your credit-based insurance score is a calculation of some (but not all) of the factors in your credit history. Insurers factor this in when calculating your rates because research has shown that there’s a correlation between certain credit characteristics and insurance losses.

Why good credit leads to lower home insurance rates

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 house 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. And you’re also less likely to fall behind on premium payments. 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. 

→ Learn about 10 more factors that affect your home insurance rates

Some states have laws to limit or prohibit insurers from using credit scores when setting rates

Certain states limit or ban insurers from using credit scores when calculating homeowners insurance rates. As of April 2022, California, Hawaii, Maryland, Michigan, Massachusetts, and Washington all have such bans or limits in place. 

Can you get homeowners insurance with bad credit?

It’s possible to get homeowners insurance with bad credit, but be prepared to pay higher rates than average. Depending on what state you live in, insurance companies may be permitted to use credit-based insurance scores as a factor in denying or canceling your policy, but it can’t be the sole reason.

But if you have poor credit on top of other factors insurers consider to be “high risk” — like say you own an older home or you have a history of filing frequent claims — having a bad insurance score in addition to all of that could make it hard to get homeowners insurance on the private market. That’s where your state’s Fair Access to Insurance Requirements (FAIR) Plan comes in.

Denied insurance coverage? Look into your state’s FAIR Plan

If you’re having trouble obtaining insurance on the private market, you can get covered through your state’s FAIR Plan — a last-resort option for high-risk homeowners. Just be prepared to receive less comprehensive coverage at a higher price. 

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How much more does homeowners insurance cost if you have bad credit?

A standard homeowners insurance policy with $300,000 in dwelling coverage costs an average $1,899 per year for a person with good credit, according to our analysis of 2022 home insurance rates across the country. 

Below is a look at how much some major insurers charge for homeowners insurance for the same amount of dwelling coverage if you have good credit vs. poor credit. As you can see, having poor credit can lead to an increase in annual home insurance costs.

CompanyGood creditPoor credit
State Farm$2,039$3,966
Allstate$1,596$2,705
USAA$1,432$2,264
Farmers$1,874$3,789
Nationwide$1,955$2,655

Keep in mind that your credit-based insurance score isn’t the sole factor that insurers consider when calculating your rates. They also look at things like the age of your home, its build, location, and more. 

What is the difference between a FICO credit score and a credit-based insurance score?

While a FICO credit score helps lenders gauge how likely you are to pay back a loan or a line of credit, a credit-based insurance score measures the likelihood of you filing an insurance claim. Most insurance companies will check your credit-based insurance score when you apply for coverage or renew your policy. There are several different companies that provide insurers with insurance scores, and each company calculates that number a little differently. 

5 factors that make up your credit-based insurance score

Your FICO credit-based insurance score is based on five key areas with varying weights, according to the National Association of Insurance Commissioners (NAIC). 

Here’s how it breaks down:

  • 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.)

How to improve your credit-based insurance score

Your credit score and insurance score are different, but the ways to improve them are similar. To improve your credit-based insurance score, here are a few tips:

  • Pay all of your bills on time

  • Pay more than just the minimum payment on your credit card bills

  • Only apply for lines of credit when necessary

  • Keep your credit utilization low on existing lines of credit

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Methodology

Policygenius analyzed home insurance rates provided by Quadrant Information Services in March 2022 for ZIP codes in all 50 states plus Washington, D.C., for a 40-year-old female homeowner with no claim history, good credit, a $1,000 deductible, and the following coverage limits:

  • Dwelling: $300,000

  • Other structures: $30,000

  • Personal property: $150,000

  • Loss of use: $60,000

  • Liability: $300,000

  • Medical: $1,000

All rates based on the above coverage limits except where otherwise noted.

Some carriers may be represented by affiliates or subsidiaries. Rates provided are a sample of costs. Your actual quotes may differ.

Frequently asked questions

Does a credit-based insurance check impact my credit score?

No — when an insurer checks your credit score, it’s what’s called a soft pull, which doesn’t affect your overall credit score.

What is a good credit-based insurance score?

Credit-based insurance scores may range anywhere from 200 to 997, depending on the company. What range is considered good will also be up to the insurance company, but the higher your score is the less risky you are to insure and the lower your rates will be.

Are there insurance companies that don’t check your credit?

Certain states limit or prohibit insurance companies from using your credit score when calculating your premiums. As of April 2022, California, Hawaii, Maryland, Michigan, Massachusetts, and Washington all have such bans or limits in place.

Policygenius agents can take your credit score into account when helping you compare multiple insurance companies so that you find the best coverage and rates for your individual needs and circumstances.