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Your credit score is considered for many things, from home and car purchases to obtaining financing for more significant investments. With homeowners insurance, your credit score is considered in a way that’s a bit different than what happens if, for example, you’re trying to obtain a car loan. The experienced agents from Altra Insurance Services, a leading provider of homeowners, business, and auto insurance San Diego residents rely on for high-quality service and affordable coverage, explain what you need to know about how your credit score could affect homeowners insurance for you.
Credit-Based Insurance Score
Credit is taken into consideration with homeowners insurance, and this has been the case for more than 20 years now. Previously, a standard credit score evaluation was done. However, this process doesn’t take everything specific to insurance into consideration, such as your risk of needing to file a claim. To make this determination, a credit-based insurance score looks at certain aspects of your credit score. Unlike a traditional credit score, which is largely based on an assessment made by the three major credit reporting agencies, a credit-based insurance score is based on criteria specific to each insurance provider.
Note: Credit cannot be used as a basis for home insurance in California, Maryland, Massachusetts, and Washington.
How Score Results Affect Homeowners Insurance
If a credit-based insurance score is good based on credit history and other factors, insurance providers are more likely to keep premiums lower. One reason is because homeowners with histories of making payments on time are more likely to keep up with home care and maintenance needs. This also reduces the risk of needing to file claims more frequently. Conversely, premiums are more likely to be higher if there’s a higher risk of lapses in coverage or filing more claims based on credit-related factors.
What Insurance Providers Mainly Consider
If you’re applying for a loan, the main focus is on your financial ability to repay what you need to borrow. However, if you’re looking to obtain or renew a homeowners insurance policy, the focus is on whether or not you have a history of handling your finances well. Also, there’s no standardization with credit-based insurance scores, since each insurance company has its own unique metrics. For this reason, it’s common for other factors to be considered as well, such as the age of your home and your current income.
Getting Home Insurance with a Poor Credit Score
It’s possible to obtain home insurance even if your credit score isn’t considered good. Because this tends to mean higher premiums, it’s a good idea to get initial quotes as you explore your policy and coverage options. Additionally, many states require insurance providers to make plans available to high-risk individuals.
Improving Your Credit Score
Your credit score does affect your homeowners insurance to some extent, at least when it comes to how much you’ll pay each month for your coverage. If you’re currently paying higher rates and you wish to lower your premiums, consider taking steps to improve your credit score. Things you can do to accomplish this goal include:
• Paying bills on time
• Periodically checking your credit report so any inaccuracies can be corrected
• Responsibly using credit and managing your payments
If you’re looking for affordable, reliable homeowners insurance and high-quality service, call on the experienced agents at Altra Insurance Services. We can help you with a wide variety of insurance options, including renter, motorcycle, and auto insurance Chula Vista. Local residents should call one of our friendly representatives today at (619) 404-6311.