Homeowners insurance for people with bad credit

Why does having bad credit affect your home insurance cost?

Insurance companies largely base the premiums they charge on the risk that you’ll file a claim. If you’re more likely to file a claim and ask the insurance company to pay out on the policy, your premium will likely be higher to account for the added risk.

Mortgage companies commonly use credit histories as a way to gauge risk, and insurance companies have taken a similar approach. Insurers use the information on your credit report to generate a credit-based insurance score. A credit-based insurance score isn’t exactly the same as your FICO credit score. While they look at many of the same factors, the two scores measure different things: your FICO score evaluates your ability to make payments on time, while an insurance-based credit score measures the risk that you’ll file a claim.

When an insurance company looks at your credit history, it conducts what’s called a “soft” credit check. Unlike a “hard” check, a soft check won’t have a material effect on your credit score. So, you won’t get dinged while shopping around and comparing home insurance quotes. 

How does credit affect your home insurance rates?

While there are many factors that affect your home insurance rate, credit history can greatly affect price. According to rates from Quadrant Information Services, average home insurance costs for homeowners with poor credit are 69 percent more than the national average for a policy with a $300K dwelling limit. On the flipside, homeowners with excellent credit pay an average of 12 percent less than the national average. 

The table below illustrates the average annual home insurance premium for each of the four credit rating tiers.

Best home insurance companies for bad credit

In most states, insurers will use your credit-based insurance score when determining your insurance premium. However, the role your credit plays in your eventual insurance costs varies from company to company. Because each insurer has its own algorithm for pricing, some assign a high weight to your credit history while others prioritize other rating factors more. This means some companies may offer more favorable rates to homeowners with bad credit than others.

Based on our analysis of average premium data from Quadrant Information Services, the cheapest homeowners insurance companies for those with bad credit include Lititz Mutual and Hawaiian Insurance and Guaranty Company, Limited. Keep in mind that these are average figures; the cheapest company for you could be different.

We’ve also included our Bankrate Scores for each provider, which go beyond average premiums and take into account things like coverage options, third-party scores and ratings for customer satisfaction and financial strength and digital presence. Each provider is scored out of a possible five points. Bankrate Scores are designed to help you quickly evaluate which companies may be worth looking at before you begin to compare home insurance quotes.

Can you get cheap homeowners insurance with bad credit?

Even if you have bad credit, you may still be able to find cheap homeowners insurance. The following shopping strategies may help to offset your credit history’s negative impact on your home insurance rates:

• Shop around and compare quotes: Not all home insurance companies attach the same weight to your credit history, or credit factors might be prohibited in the state you live in. Make sure that you request quotes from several home insurance carriers for the same coverage types and levels and consider other factors such as customer service and coverage options that are important to you before settling on a single insurer.
• Review available discounts: Many insurers offer potential discounts on premiums if you qualify. Common discount opportunities include bundling your home and auto insurance policies, installing safety devices like smoke alarms, fire extinguishers and security systems or installing smart home devices.
• Improve your credit: Because your credit history impacts your premiums in most cases, you might save money by improving your credit over time. When it comes time to renew, you might see premiums drop if your score has gone up if your insurer factors credit. It won’t happen overnight, but taking steps to boost your credit could help you save in the long term.

Speaking with a licensed insurance agent can help you decide on the best overall strategy to save on your home insurance if you aren’t sure where to start.

How to improve your credit record for better home insurance rates

If you’re in a poor credit bracket, you may find it worthwhile to improve your credit before applying for home insurance. While the process may seem daunting, you may be able to improve your credit record over time by:

• Making payments on time: Your payment history is the most important factor in determining your credit score. One late payment can cause a big drop, so do your best to pay every bill by its due date.
• Utilizing less of your available credit: Maxing out your credit cards is bad for your credit. Aim to use no more than 30 percent of your available credit to keep your credit score as high as possible.
• Checking your report for errors: Credit bureaus aren’t perfect and may accidentally put inaccurate information in your report. Removing those errors could boost your score. By law, you can request three free credit reports each year, giving you a chance to monitor your credit for issues.
• Minimizing hard credit checks: Credit checks can either be hard checks or soft checks. Soft pulls happen when your credit is requested for an informational purpose, such as by a credit monitoring service or when you ask for an insurance quote. Hard checks typically happen when you apply for new loans or credit cards. Each hard credit check drops your score by a few points, so you may want to avoid applying for loans or credit too often.

Frequently asked questions

Methodology

Bankrate utilizes Quadrant Information Services to analyze November 2024 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on married male and female homeowners with a clean claim history, good credit and the following coverage limits:

• Coverage A, Dwelling: $300,000
• Coverage B, Other Structures: $30,000
• Coverage C, Personal Property: $150,000
• Coverage D, Loss of Use: $60,000
• Coverage E, Liability: $500,000
• Coverage F, Medical Payments: $1,000

The homeowners also have a $1,000 deductible, a $500 hail deductible and a 2 percent hurricane deductible (or the next closest deductible amounts that are available) where separate deductibles apply.

These are sample rates and should be used for comparative purposes only. Your quotes will differ.

Credit: Rates were calculated based on the following insurance credit tiers assigned to our homeowners: “poor, average, good (base) and excellent.” Insurance credit tiers factor in your official credit scores but are not dependent on that variable alone. The following states do not allow credit to be a factor in determining home insurance rates: California, Maryland, Massachusetts.

Bankrate Score

Our 2024 Bankrate Score considers variables our insurance editorial team determined impacts policyholders’ experiences with an insurance company. These rating factors include a robust assessment of each company’s product availability, financial strength ratings, online capabilities and customer and claims support accessibility. Each factor was added to a category, and these categories were weighted in a tiered approach to analyze how companies perform in key customer-impacting categories.

Each category was assigned a metric to determine performance, and the weighted sum adds up to a company’s total Bankrate Score — out of 5 points. Our scoring model provides a comprehensive view, indicating when companies excel across several key areas and highlighting where they fall short.

• Tier 1 (Cost & ratings): To determine how well auto and home insurance companies satisfy these priorities, average quoted premiums from Quadrant Information Services (if available), as well as any of the latest third-party agency ratings from J.D. Power, AM Best, Demotech and the NAIC, were analyzed.
• Tier 2 (Coverage & savings): We assessed companies’ coverage options and availability to help policyholders find a provider that balances cost with coverage. Additionally, we evaluated each company’s discount options listed on its website.
• Tier 3 (Support): To encompass the many ways a home insurance company can support policyholders, we analyzed avenues of customer accessibility along with community support. This analysis incorporated additional financial strength ratings from S&P and Moody’s and factored a company’s corporate sustainability efforts.