Surprising Ways Your Credit Score Affects Your Home Insurance

When most people think about their credit score, they associate it with buying a car, qualifying for a mortgage, or getting a new credit card. But did you know your credit score can also impact your home insurance premiums? While it may seem unrelated, insurers often use credit-based insurance scores to help determine how much you’ll pay for coverage.
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Let’s explore how and why your credit score affects your home insurance—and what you can do about it.

What Is a Credit-Based Insurance Score?
A credit-based insurance score is a type of credit evaluation used by insurance companies to help predict the likelihood that a policyholder will file a claim. Unlike a standard credit score used by lenders, this score focuses on credit behaviors that have been statistically linked to insurance risk.

It may include factors such as:

• Payment history
• Length of credit history
• Types of credit in use
• Outstanding debt
• Recent credit inquiries

Importantly, this score does not include your income, employment history, or race—insurers are prohibited from using those factors in their scoring models.


How Your Credit Score Affects Your Home Insurance
Insurance companies use your credit-based insurance score to help set your premium.

Here's how it can impact you:
1. Higher Scores = Lower Premiums
If you have a strong credit history, you may qualify for lower home insurance rates. Insurers often view responsible credit behavior as an indicator of overall financial responsibility, which they correlate with lower claims risk.

2. Lower Scores = Higher Rates
On the flip side, if your credit score is poor, you might pay significantly more—sometimes hundreds of dollars more per year—for the same level of coverage. This is because you’re considered a higher risk for filing a claim.

3. Policy Approval and Terms
While rare, some insurers may deny coverage or limit policy options based on very low credit scores, particularly in competitive markets.


State Regulations on Credit Use
Not all states allow the use of credit in insurance pricing. For example:

• California, Massachusetts, and Maryland prohibit the use of credit scores in homeowners insurance underwriting or rate setting.
• In other states, laws may require that credit scores are only one part of the rating process.

Always check with your state's insurance department to understand how credit is used in your area.


What You Can Do to Improve Your Insurance Outlook
Improving your credit can directly impact your home insurance costs over time. Here’s how:

• Pay your bills on time — late payments hurt your score the most.
• Reduce credit card balances — keeping your usage low improves your score.
• Limit new credit applications — too many inquiries in a short time can reduce your score.
• Check your credit report regularly — dispute any inaccuracies that may be dragging your score down.

Also, don’t hesitate to shop around. Different insurers weigh credit factors differently, and some may offer better rates than others even with the same score.


Final Thoughts
Your credit score is more than a number—it can directly impact the cost of your home insurance. Understanding how insurers use it gives you the power to take control of your premiums. With good credit habits and a proactive approach, you can potentially save hundreds of dollars each year on your home insurance.
Strong credit. Smarter insurance. Bigger savings.

At Family Auto Insurance Agency, we strive to provide our clients with affordable and comprehensive policies. We will always go all out to satisfy your demands. To learn more about how we can assist you, don't hesitate to contact us at (313) 285-9042 or CLICK HERE ​to request a free quote.

Disclaimer: The information presented in this blog is intended for informational purposes only and should not be considered as professional advice. It is crucial to consult with a qualified insurance agent or professional for personalized advice tailored to your specific circumstances. They can provide expert guidance and help you make informed decisions regarding your insurance needs.​