Can Credit Affect your Home Insurance Costs?

You probably know that your credit scores have a huge impact on your ability to get a home loan, and you may also know that your credit score affects the interest rates you are eligible for on that loan.  Credit affects your interest rates on your credit cards, your ability to get a car loan or to apply for a rental application for an apartment.  But did you know it could potentially affect what you pay for your home insurance?

It is common practice for insurance companies to do a soft credit check when you apply for homeowners insurance.  What is a soft credit check?  When you apply for a home loan, a car loan, or any other process involving a lender, they run a credit check that shows up as an inquiry on your credit score.  When you have too many of these "pings" on your credit, it can negatively impact your scores.

A soft credit check only accesses your credit score and not your credit history.  These soft checks do not affect your credit.  This means that even if you talk to many insurance companies, it will not change your credit score, so feel free to shop around for home owner's insurance.

Why do they need your credit score?

When an insurance company runs your credit scores, they use it along with other factors to assess your risk potential and assign you an "insurance score".  They take your risk factor and figure out your insurance premiums from there.

Does this seem fair?  Many people don't think so.  The insurance companies claim that your credit score can have an impact on your likelihood to file a claim.  According to their research, people with lower credit scores tend to file more claims.

Fair or not, it is another good reason to keep your credit score up!

You can find the original article here:  Does Your Credit Score Affect Your Homeowners Insurance Cost? | Keeping Current Matters