You likely already know that your credit history impacts the interest pay on your loans and your eligibility for credit cards. But, did you know your credit history also impacts your home insurance premium?
Home insurance companies assess how likely you are to raise claims by checking your credit-based insurance score. A credit-based insurance score (CBI) is similar to your FICO credit score, except that different insurers use varied parameters to calculate CBI scores. Although the CBI score is one of the many factors that determine your home insurance rates, and not the sole factor, it can still affect your home insurance premium by more than 30%.
What Factors Affect Your Credit-Based Insurance Score?
While not all insurance companies use the CBI score to determine premium rates, and some states even prohibit insurance providers from considering them, it is still common for home insurance providers to take your credit-based insurance score into account when deciding your premium. Insurers assume that people with high credit scores will be less likely to file a claim.
Some factors that can positively impact your credit-based insurance score include making repayments on time, a long credit history, low credit utilization score, and having several credit and bank accounts in good standing. However, if you have many credit or bank accounts in collection, a high credit utilization score, multiple recent applications for credit, and payment defaults, your CBI score may get negatively affected.
How Do You Check What Your Credit-Based Insurance Score Is?
Credit-based insurance scores vary from insurer to insurer. Given that insurance providers use different parameters and models to calculate CBI scores, you will like not to be able to find out or calculate exactly what your insurance credit score is. However, since the CBI score is based on your credit score, checking your credit report can help you predict how it may be impacting your insurance premiums. For instance, the closer your credit score is to 850, the better are your chances of getting a competitive premium quote.
The Bottom Line
Over the course of many years, your premium payments can really add up. So, try to maintain a good credit score to keep your home insurance premiums affordable!