You probably already know that it’s a good idea to keep track of your credit scores. but do you know what your home insurance score is?
A home insurance score is different from a credit score, but it’s still important to know as it can affect how much you pay in premiums on your homeowners insurance.
so what is the difference between the two types of scores?
Reading: What is my home insurance score
Credit scores are based on your ability to repay what you’ve borrowed, while a home insurance score predicts the chances that you’ll file a homeowner’s insurance claim resulting in loss to the insurance company. insurance.
Although credit scores and home insurance scores serve different functions, some factors from your personal credit history are also considered when calculating home insurance scores. That’s because some studies have shown that a person’s financial history is generally a good indicator of how likely they are to file an insurance claim.
Just like with credit, for insurers, the higher your insurance score, the lower the risk you pose to them. The good news: Lower risk and a higher insurance score generally result in lower premiums.
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Let’s find out how home insurance companies determine your home insurance scores, what makes you a higher (or lower) risk for them, and how that ultimately affects the cost of your home insurance premiums. .
- What factors make up a home insurance score?
- Why is credit history used to determine home insurance scores?
- how to find your home insurance score
- oldest account age. Unlike average account age, your oldest account age is the age of the first credit account you opened that is still open. listed on your credit reports. It can be from your college days or from your 20s.
- credit card utilization. utilization is the total amount of outstanding debt on your credit cards divided by the total limits on your credit card. In general, the higher the utilization, the higher the insurance risk.
- derogatory marks. derogatory marks cover a variety of negative information on your credit reports. you don’t want them on your credit reports, because an insurance company will likely see you as a higher risk to file a claim.
- In-depth inquiries. In-depth inquiries are typically done when applying for a new line of credit, as well as occasionally for apartment rental applications. the more hard queries you have, the more insurance risk you may pose to an insurer.
- Amount Past Due. If you always pay your credit cards (or at least the minimum amount) on time, you won’t have an amount past due. it’s okay. an amount past due can pose a higher insurance risk, especially if the total past due on all of your credit is high.
- status of your credit accounts. your credit reports show whether your accounts are paid on time with at least the minimum payment made. If your credit accounts are in good standing, this can have a positive impact on your homeowners insurance scores. if any accounts have been sent to collection, foreclosure, or repossession, your scores may be negatively affected.
- Total credit card limits. This is the total dollar amount of all limits on all your credit cards. higher total credit limits can be good. may indicate lower insurance risk.
- Your home and neighborhood. There are other factors about your home and neighborhood that insurers may consider when determining your score. These include the proximity of your home to a fire hydrant or fire station, the history of claims in your neighborhood, whether it has an alarm system, and whether it is located in an area prone to natural disasters. All of these factors (and many more) can be considered when determining how low or high your insurance premiums will be.
what factors make up a home insurance score?
Each insurer has its own method of assigning you a home insurance score. however, regardless of who determines a score for you, the complexity of the factors and calculations involved in generating a score makes it difficult to determine exactly what might increase or decrease your home insurance scores.
Fortunately, we have enough information from studies and insurance company websites to get a good idea of what factors make up a home insurance score, including information from your credit reports and even some information about your home and neighborhood. .
Here’s a breakdown of some of the factors that can influence your home insurance scores. You may recognize some of these factors if you religiously follow your credit, and that’s because credit often plays a big role in calculating your home insurance scores.
Because home insurers factor in factors from your credit history, you’ll often see your score referred to as a credit-based insurance score. according to fico®, about 85% of home insurers use credit-based insurance scores in states that allow it.
Why is credit history used to determine homeowners insurance scores?
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Home insurance scores are designed to help insurers predict whether you will file a claim that will result in loss specifically in an insurance context, but insurers may view credit risk and insurance risk as linked. By measuring the amount and degree of risky behavior a consumer engages in with credit, insurers try to predict the likelihood that the consumer will engage in risky behavior that could lead to an expensive insurance claim.
Important thing to remember: Insurance companies want to see a track record that reflects stable and responsible decision-making. As long as your credit history reflects this, you can pursue a healthy home insurance (and credit) score, which means potentially better insurance premium rates for you.
how can i improve my credit?
There is no quick fix. Improving your credit health takes time, but the most important behaviors can be summed up like this: pay your bills on time (and if possible, in full) and reduce the amount you owe. It also helps to check your credit reports regularly. Any errors, such as a collection account that hasn’t been removed from your reports after seven years, should be disputed with the credit bureaus.
how to find your home insurance score
To find your home insurance scores, contact your current home insurer or its competitor. Remember, each insurance company uses its own model to determine your score. your premiums may be lower for companies that calculate a higher score for you.
If you’re worried about your home insurance scores, the good news is that maintaining your overall credit health is a good place to start. As a reader and user of Credit Karma, you’ve probably already been keeping an eye on your credit. Keep it up: Responsible credit management can benefit you in more ways than one.
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