Your Home Insurance Score Explained

Thu Jul 19 2018

Your insurance score is different than a credit score. Learn about it here.

While most folks have at least heard of credit scores, insurance scores may be a mystery. Essentially, your home insurance score can impact how much you pay for your coverage, depending on where you live. Most states allow insurance carriers to factor this a credit-based insurance score into policy pricing. Let’s take a closer look at what this score is and how insurers determine it. You’ll also pick up some tips on improving your insurance score, which can help you save money on home insurance in some cases.

What Is a Home Insurance Score?

Your home insurance score is number that represents how likely you are to file a claim on your policy. Essentially, your insurance company assigns a value to certain details from your credit history, runs them through an algorithm, and calculates your score. Because the calculation includes credit information, your score is sometimes called a credit-based insurance score.

While both your credit and insurance scores are calculated using many of the same variables, they serve different purposes. Lenders use credit scores to decide if they should lend you money. A good credit score tells them you’re financially responsible individual who will most likely pay off the debt. That information is valuable to insurers, too, but they also want to figure out how much you might cost them over time. Claims cost insurance companies money, and studies have shown people with high credit scores tend to file fewer claims.

Home Insurance Scores vs Credit Scores

A credit score is a three-digit number designed to predict the likelihood that you will or won’t be able to pay back your credit obligations 24 months following the scoring. Your credit score is based on factors like your debt, payment history, number of available credit lines, and the length of your credit history.

An insurance score takes those credit factors into account, too, but it also considers your insurance claim history, your home’s safety features, fire protection class, and more. It varies depending on the insurance company.

Your credit report plays a key role in your insurance score. To give you an idea of what matters most to your score, take a look at how FICO weighs different credit factors:

  • Late or missed payments are 35 percent of your score.
  • Available credit is 30 percent.
  • Depth and length of credit history is 15 percent.
  • Total number of accounts makes up 10 percent.
  • Hard inquiries are 10 percent.

It’s also worth noting that credit-based insurance scores are governed by the Fair Credit Reporting Act, which means insurance providers can’t consider the following when calculating your score:

  • Race
  • Ethnicity
  • Gender
  • Age
  • Marital status
  • Nationality
  • Religion

Does Checking Your Insurance Score Impact Your Credit Score?

While some insurance companies do a hard credit inquiry (i.e., a hard pull) to calculate your insurance score – which does impact your credit score – Kin only does a soft credit inquiry, which doesn’t.

Hard inquiries are usually used for new lines of credit, mortgage and auto loan applications, student loan applications, and apartment rentals. These can stay on your credit report for up to two years. Too many hard inquiries in a short amount of time can bring down your credit score.

Soft inquiries don’t stay on your credit report. These are usually used for things like checking your credit score, pre-qualified credit card offers, pre-qualified insurance quotes, and for employment verification.

How to Improve Your Home Insurance Score

Home insurance scores typically fall between 200 and 997. A score of 770 or above is considered good and usually means insurers can offer better rates and discounts when they are allowed to factor in a credit-based insurance score. Anything below 500 means you have some work to do.

First, you can improve your credit score by:

  • Paying bills on time.
  • Keeping your balance low on your credit cards.
  • Reducing your overall debt.

You might even consider going to a credit counselor to get on track.

Next, be smart about insurance claims. Not every incident is worth filing a claim. Think twice before filing if your repairs are less than your deductible or you think you can do them yourself.

Finally, you may want to shop around. Different carriers sometimes offer better rates, so compare policy terms and premiums before you buy home insurance.

How to Dispute Negative Entries on Your Credit Report

Under the Fair Credit Reporting Act, it’s your right as a consumer to dispute any inaccurate information. The act details what information your credit report can show and how long that information can stay on your report (typically about seven years).

It’s easiest to report a dispute either online or via mail to the credit bureau who provided the credit report. To make a dispute, you’ll need:

  1. A recent copy of your credit report.
  2. A description of the inaccurate information on your report.
  3. Copies of proof to support your case.

The credit bureau will cross reference your dispute with the business that reported the error. If the credit bureau confirms that the information was reported in error, they’ll remove the entry.

For your reference, here’s the contact information for most credit bureaus:

LexisNexis Consumer Center

P.O. Box 105108 Atlanta, GA 30348-5108

1-800-456-6004

Experian

P.O. Box 4500
Allen, TX 75013

TransUnion Consumer Solutions
P.O. Box 2000
Chester, PA 19016-2000

Equifax Information Services LLC
P.O. Box 740256
Atlanta, GA 30374-0256

Be sure to follow the credit bureau’s dispute instructions carefully before submitting your case. You want to give yourself the best shot at success!

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