It can be difficult to purchase a home with bad credit. Potential buyers may have to pay higher interest rates and higher down payments. Likewise, insurance companies may check your credit before issuing home owners policies. Even if you have credit issues, you may still be able to obtain homeowners insurance with bad credit.
Insurance companies can use scores to determine the amount of risk associated with issuing a policy. These scores can be referred to as credit-based insurance scores (CBI scores). They can be based on information from your credit report such as your bill payment history, your outstanding debt and the presence of any collection actions on your credit report. You may be assigned an insurance score when you apply for homeowners insurance.
Getting a Good Insurance Score
People with good insurance scores may have lower insurance premiums or qualify for special discounts. There are a few factors that can improve your chances of having a good insurance score.
- Good Payment History. Pay all your bills on time.
- Low Credit Balance. Don’t max out your credit cards.
- Lengthy history of using credit. The longer period that you have a history of using credit wisely can positively affect your score.
While it is not impossible to get homeowners insurance with bad credit, a poor insurance score can mean that you may pay a higher insurance premium.