How Your Credit Score Affects Your Homeowners Insurance Premium
When most people think about their credit score, they usually associate it with loan approvals, interest rates, or credit card applications. However, your credit score can also influence something you might not expect—your homeowners’ insurance premium. If you’ve ever wondered why your rate seems higher or lower than someone else’s, your credit score could be part of the reason.
The Connection Between Credit and Insurance Rates
Insurance companies use a variety of factors to assess risk, and one of those factors is your credit-based insurance score. This score is derived from elements of your credit report, such as your payment history, outstanding debt, length of credit history, and recent inquiries. While it’s not exactly the same as your FICO credit score, the two are closely related.
The logic behind using credit information is simple: studies have shown that people with higher credit scores tend to file fewer insurance claims. Insurers interpret a strong credit history as a sign of financial responsibility and stability, which they associate with lower risk. As a result, homeowners with higher credit scores often qualify for lower premiums. Conversely, if your credit score is low, your insurer may view you as a higher risk, leading to higher insurance rates.
How a Poor Credit Score Can Cost You
A low credit score doesn’t just affect your ability to get loans—it can increase the cost of your homeowners’ insurance significantly. In some cases, homeowners with poor credit could pay 50% or more than those with excellent credit for the same coverage. That means two neighbors with identical homes and insurance needs might pay very different premiums simply because of their credit profiles.
Factors such as late payments, high credit card balances, and a short credit history can negatively impact your score. Insurers may also review your credit periodically, so improving your score over time can lead to better rates in the future.
Steps to Improve Your Credit and Lower Your Premium
If your credit score is affecting your homeowners’ insurance rate, don’t worry—there are steps you can take to improve it:
- Pay bills on time. Your payment history makes up a large portion of your credit score.
- Reduce credit card balances. Keeping your credit utilization below 30% can help boost your score.
- Avoid too many new credit inquiries. Each application can temporarily lower your score.
- Check your credit report for errors. Mistakes happen, and disputing inaccuracies can make a difference.
- Build long-term credit habits. Consistency over time is key to maintaining a solid score.
Over time, these efforts can improve your financial profile and may help you qualify for lower homeowners insurance premiums.
Partner with a Local Expert Who Cares
Understanding how your credit score impacts your homeowners’ insurance is an important step in managing your overall financial health. But you don’t have to navigate it alone. The Howard Steele Agency, a trusted Bend, Oregon insurance agent, can help you find the best homeowners insurance coverage at a rate that fits your budget.
Whether your credit is excellent or still a work in progress, their team will guide you through personalized insurance options that make sense for your unique situation.
Call the Howard Steele Agency at (541) 318-8835 to speak with an insurance agent and review your homeowners insurance needs or click here to connect with us online.
You May Also Like
Do I need homeowners insurance for my condo?
The Essential Guide to Homeowners Insurance in Oregon: Protecting Your Property and Peace of Mind
