Home Insurance Information and Your Credit Score

If you are a homeowner who uses the Internet to research the home insurance market, you have probably seen the websites that all promise to provide you with free quotes at "no obligation' for your insurance needs. What they do not always tell you is that insurers are keeping a watchful eye on you during the process: too many quotes over a certain period of time can damage your credit.

Insurers routinely run credit checks on potential applicants; when you are ready to purchase home insurance request all of your quotes within 14 days to minimize the damage to your credit score. Your credit score is a 3-digit number from 0 to 999, derived from using the credit scoring model that gives a value to certain factor. Because your credit score is from one moment in time, it is important to make sure your credit report is current and accurate.

If your credit report is used by insurance companies to decide whether or not to issue a home insurance policy they will look to see at the following:

1. Credit activity: the length of your credit history.
2. The number of inquiries, credit applications and open credit lines; credit cards, mortgage loans or utility accounts.
3. Late payment history, negative items such as bankruptcy, liens, foreclosures, collections or charge-offs.
4. Current credit in use; type of credit cards, loans etc.
5. Debt level; the amount of money you owe versus your level of credit.

Home insurance companies use your credit score for underwriting new policies and renewing existing policies and rating your insurance level which decides what basic cost you will pay. Some insurers hold the viewpoint that individuals with low credit scores are the most likely to file a claim—making them a "bad risk.'

Home insurance providers are required by the Fair Credit Reporting Act to notify you if an "adverse action" has been taken against you because of your credit report information and the name of which credit bureau supplied the information. If your credit score was used to evaluate your home insurance premium rate, and you are paying a higher premium as a result, ask your insurer if they will review your rate when your credit score improves. When you receive a copy of your credit report, if errors are found, follow the required procedures to correct and remove them from your credit report, and then notify your home insurance company of the errors as well.