How Your Credit Score Affects Your Homeowners Insurance Rates

How Your Credit Score Affects Your Homeowners Insurance Rates

How Your Credit Score Affects Your Homeowners Insurance Rates

Homeowners’ insurance is one of the most important things to take care of when you buy a home. A standard homeowner’s insurance policy covers any damages caused to your home due to accidents. Some policies also include coverage for damages caused due to floods and earthquakes. Now all this comes at a cost, which you have to pay as premium to the insurance company. The cost of your homeowners insurance can be high or low, as it depends on a number of factors. Among them is your credit score, which can impact your homeowners’ insurance rates significantly.

Credit check for insurance?

It is common for lenders to ask for your credit information when you apply for a loan. But to ask for them when you apply for insurance can seem a little odd. Actually, it is not at all odd for insurance companies to ask for your credit information before they process your application. How does your credit score matter to insurance companies, you may ask, when you are paying insurance premiums.

According to insurance companies, a person’s credit score has a direct correlation with the possibility of a claim. In simple words, insurance companies tend use a person’s credit score for risk assessment. If your credit score is high, there is a good chance that your insurance premium is low. If your credit score is low, you are considered as a high risk customer, which means the premium you pay is also going to be high.

How does it impact your credit record?

Every time a lender performs a credit check on you, it is recorded and appears permanently on your file. The more number of checks performed, the higher the impact will be on your credit score, which is why many people tend to limit the number of their loan applications. But in case of insurance credit checks, you do not have to worry about your credit score being reduced.

Unlike individual lenders and financial institutions that perform a proper and thorough credit check, insurance companies only indulge in what is known as a “soft” credit check, which involves in only referring to your credit score and nothing else. This kind of soft check is not recorded, which means it does not appear on your credit record. So an insurance credit check does not affect your credit score in anyway, but it certainly does determine if your homeowners’ insurance premium is going to be high or low.

Call Now Button