Several factors affect the cost of Long Island home insurance, including your credit score. Generally, people with higher credit ratings tend to pay less for home insurance in states where credit plays a role in rating insurance risk. Insurance companies use what's known as a credit-based insurance score to determine how much to charge you. It's important to note that each insurance company has its own formula for calculating credit-based insurance scores. Here are a few things you may want to know about how your credit score affects the cost of your insurance.
Credit-Based Insurance Score
Also known as an insurance score, a credit-based insurance score is a figure that describes how stable your credit is as viewed by the insurance company. This figure is used to determine the rate you are offered. Credit-based insurance scores depend on several factors, which may vary by insurance company. However, there are factors that generally positively or negatively impact your score.
Factors that can improve your CBI score
Factors that positively impact your credit-based insurance score include a long credit history. You also get a better score if your credit and bank accounts are in good standing. Low credit usage and no late payments on different accounts are also good contributors.
Factors that negatively impact your CBI Score
Having numerous past-due accounts and high usage of credit will contribute to a poor credit-based insurance score. Additionally, multiple recent credit applications and credit accounts in collection will also work against you.
Why CBI Scores Are Important to Homeowners Insurance Companies
According to insurance experts, there's a link between a person's credit-based insurance score and how likely they are to file claims. Essentially, insurance companies use your ability to maintain a high credit score as a measure of risk. This is a good indicator of how likely you are to claim and how large your claims may be.
For instance, someone with a stellar credit record is likely to keep up with their home's maintenance and security needs. This makes them less risky to deal with than someone failing to keep up with their mortgage payments.
As a result, homeowners insurance companies offer more costly rates to individuals with poor credit ratings. On the other hand, if you have a spotless credit history, you are likely to get some discounts.
How Much More Do You Have to Pay if Your Credit is Poor?
In some instances, customers with excellent credit scores can save up to 20% or more on their premiums. On the other hand, if you have a particularly bad credit record, you may even find yourself paying more than double. This emphasizes the importance of improving your credit score and hence your CBI.
Tips to Get Cheaper Rates With Bad Credit
Almost all major homeowners insurance providers will check your credit when figuring out what rate to offer you. The good thing is that it's quite rare for an insurance company to refuse to sell you a policy due to bad credit alone. Additionally, calculating your CBI is one of many other factors used to determine your homeowners' insurance rates. If your credit history is poor, but you are diligent in maintaining your home and rarely file claims, your rates may be lowered over time.
Please note that homeowners' insurance providers in California, Maryland, and Massachusetts will factor in your credit score when deciding your rates. The governments in these states have banned this practice.
Home insurance offers peace of mind by knowing that your home is protected. If you are worried that your low credit history may affect your premiums, you may have to find ways to improve your score and better manage your finances, so you get to pay less. You also need to take good care of your home and avoid making unnecessary claims.