clock September 20, 2018 comments No Comments flowchart Homeowners InsuranceOur Blog tag Saving Money

a woman researching home insurance scoresYour home insurance score differs from your credit score, but there’s definitely a connection. Here’s what you need to know about how your insurance company calculates your score and how you can improve it.

Insurers Do Look At Your Credit Score in Rhode Island

Credit scores rate your ability to repay debt, but your home insurance score predicts the likelihood of you filing a claim that will cause them a financial loss. Insurers are legally entitled to use your credit history for underwriting and rating purposes in Rhode Island. This is because statistics show a relationship between credit history and insurance claim frequency.

If you want to lower your premiums, improve your credit and your insurance score will usually increase, which usually lowers premiums too. The DMV offers useful credit improvement suggestions and a link for obtaining your free credit score.

Basically, lenders want to see stability and responsible decision-making. While there’s no quick fix to improve bad credit, you can improve your credit score with time.

Check your credit report regularly, pay your bills on time, and reduce your debt load. Ensure your credit report does not include errors that could affect your credit report negatively too. For instance, dispute any collections on your account if they are over seven years old.

How Often Do Insurers Use Credit Information?

According to FICO, about 85 percent of home insurers use credit-based insurance scores as rating factors in states like Rhode Island where they’re legally entitled to do so. Basically, you can’t afford to ignore your credit and expect a great insurance score. If you pose a higher risk, you will pay higher premiums.

Insurers Use Their Own Formulas

This is one of the primary reasons you should use an independent insurance agent. Every insurer uses different factors and calculations to determine your insurance score. Your score can vary between one company and another, so it makes sense to let an agent do the legwork for you to access the best possible rates and coverage.

Many Factors Affect Insurance Score

While credit plays a role, it is not the sole factor. Insurers also look at whether your home is close to a fire hydrant or fire station, the claims history for your neighborhood, your claims’ history, whether your home has added security, and whether you live in a disaster prone area. Of course, they also evaluate the construction type and age of your house.

Adding security features, a sprinkler system, or upgrading your home to withstand damage could all lead to a higher insurance score, lower premiums, and insurance discounts. If you remain claims-free it is always a positive sign for insurance companies.

Your independent insurance agent is your trusted ally when it comes to reducing premiums while maintaining excellent coverage. Let them find the best possible Rhode Island home insurance policy for you at the most reasonable price. They can suggest ways to lower your insurance costs if you’re considering upgrades or additions too.

The fact is, there are a handful of factors that go into determining your homeowners insurance rates — and your credit-based insurance score is just one of them.
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