Homeowners’ Insurance Could As Much As Double for Borrowers With Poor Credit, Study Finds

Credit scores have become an increasingly important rating factor when it comes to how much a consumer pays for homeowner's insurance. According to a new insuranceQuotes.com study, homeowners with low credit scores pay twice as much for homeowner's insurance compared to those with excellent credit.

The study, conducted by Quadrant Information Services and commissioned by insuranceQuotes.com, reviewed the average impact the consumer's credit-based insurance score has on what they pay for home insurance.

"Insurers are putting more emphasis on credit scores this year."

If a homeowner has a poor credit score, they pay at least twice as much for homeowner's insurance compared to consumers with excellent credit in 38 states and Washington, D.C., the study noted. Homeowners with a fair or median credit score may pay 32 percent more for home insurance on average than someone with excellent credit, up from a 29 percent increase in 2014.

In addition, the study found that premiums may increase by an average of 100 percent, up from 91 percent last year among homeowners with poor credit, rather than excellent credit.

“In most states, insurers are putting more emphasis on credit scores this year,” said Laura Adams, insuranceQuotes.com’s senior analyst. “The impact of a poor credit score is higher now than it was last year in 29 states and Washington, D.C., while it is lower in just 17 states. It’s more important than ever for people to maintain a solid credit rating by paying their bills on time, keeping their balances low and correcting errors on their credit reports.”

Credit-based scoring is not popular among everyone. Some argue that using credit history to determine risk is "unfair and irrelevant."

"The damage that leads to many home insurance claims is often random, sudden and accidental–things like break-ins, slip and falls, or weather events," said Amy Bach, executive director of San Francisco-based nonprofit United Policyholders. "There is no way an individual's credit score has a causal connection to those events."

According to the study, homeowners with poor credit in West Virginia pay 202 percent more for homeowners insurance, the highest percentage in the nation, followed by the District of Columbia (185 percent), Ohio (185 percent), and Montana (179 percent).

California, Massachusetts, and Maryland prohibit insurers from using credit to calculate homeowner’s insurance premiums so these states saw no increase, insuranceQuotes.com said. Insurance companies are technically allowed to consider homeowners’ credit scores in Florida, but insuranceQuotes.com found that credit does not typically affect premiums there.