How Your Credit Impacts Your Homeowners Insurance
When most people think about their FICO score, they associate it with loan approvals and credit card interest rates. But did you know that your credit can also influence your homeowners insurance premiums?
Insurers often use credit-based insurance scores—a variation of your FICO score—as part of their risk assessment when determining how much you’ll pay for coverage. Let’s explore what your FICO score is, how insurers use it, and what you can do to make sure it doesn’t negatively impact your premium.
What Is a FICO Score?
A FICO score is a three-digit number ranging from 300 to 850 that represents your creditworthiness, based on information in your credit report. It’s calculated using factors like:
- Payment history
- Amounts owed
- Length of credit history
- New credit inquiries
- Types of credit used
The higher your FICO score, the more favorably you’re lenders view you—and, as it turns out, insurers.
How Insurers Use Credit Scores
Insurance companies often use a version of your credit score, known as a credit-based insurance score, to help predict the likelihood of you filing a claim. Individuals with lower scores tend to file more claims or cost insurers more when they do, so insurers may charge them higher premiums to offset the risk.
Credit-based insurance scores do not include income, employment history, or race. And, not all states allow the use of credit scores in determining insurance premiums. For example, California, Maryland, and Massachusetts restrict or prohibit the practice.
The Impact on Homeowners Insurance
If your credit score is low, you might find that your homeowners insurance premiums are higher than those of someone with a better score, even if you both own similar homes in the same neighborhood.
Some insurers may also:
- Deny coverage entirely based on a very poor credit score.
- Offer limited policy options.
- Require higher deductibles or exclude certain coverages.
What You Can Do
- Check Your Credit Report Regularly
Review your report for errors or signs of identity theft, and dispute inaccuracies through Equifax, Experian, or TransUnion.
- Improve Your FICO Score
You can influence your score by:
– Paying bills on time
– Reducing credit card balances
– Not opening multiple new accounts at once
- Use a Broker Who Works with Different Carriers
Different insurers weigh credit information differently. Having a broker—like our partner, VIU by HUB—who gets quotes from multiple companies can help you find your best rate.
- Ask About Exceptions
Some insurers offer reconsideration if your credit score dropped due to extraordinary life events, like job loss or medical issues.
Final Thoughts
Your FICO score can affect more than just your ability to borrow—it can influence how much you pay to protect your home. Understanding this connection empowers you to take control of your credit, shop smart for insurance, and ultimately save money.
Finding a competitive policy that maximizes your coverage based on your credit score doesn’t have to be hard. Get a quote and speak to an agent today to see offers that could save you money, and choose the coverage that’s right for you.
