May 6th, 2013

The Importance of Home Insurance Scores

46 Comments | Twitter | |

 

**Today’s guest post is contributed by Carrie and Shannon.**

A big part of financial responsibility is maintaining adequate insurance coverage. Premiums act as a safeguard for your assets, and a little money spent now might pay off big time in the future. How much you pay now, though, will vary. You probably don’t have the same premiums as your brother-in-law or neighbor. How can you predict rates then? Credit Karma already provides your auto insurance score and now provides your home insurance score as well.

What’s a home insurance score?

Insurance scores are similar to credit scores in that both are generated by an algorithm that weighs information in your credit report. Your credit score evaluates your payment history, the amount you owe, how long you’ve had credit, and the type of credit you use to predict the likelihood that you’ll become delinquent on your credit obligations over the next two years.

Insurers use the same information, though it is weighted differently, to help predict your risk of filing a claim. Your home insurance score is used, along with other factors such as the size and value of your home, where you live, your claims history, and other factors to set your homeowners insurance rate.

Why are credit-based scores used, and are they fair?

Studies support the notion that credit scores help predict the likelihood of a policyholder to file claims. Here’s the thing: The equation used to determine your insurance score may be unique to your insurance provider. That’s one reason why you could get a range of quotes from different providers when you’re shopping for home insurance.

Are credit-based scores fair? The Federal Trade Commission conducted a study in 2007 that found there is a definite connection between credit and the likelihood of filing a claim. The Property Casualty Insurers Association of America also maintains there is a connection, though it admits it can’t explain it. The PCIAA says most studies show that policyholders qualify for more preferred policies when credit information is considered.

Which parts of a credit score influence an insurance score?

Insurance scores aren’t used to measure creditworthiness, so only specific parts of a credit report are used to determine them. Providers might examine a person’s number of retail credit cards, the age of the oldest account and the number of inquiries in the past two years.

Since only specific parts of a credit score are used to calculate an insurance score, you can’t always predict insurance scores based on overall creditworthiness. While an individual may have an overall pristine credit score, other factors might be lacking. For example if the same homeowner filed multiple homeowners insurance claims in the past few years, their insurance score may be negatively impacted regardless of their creditworthiness.

Do insurance companies credit checks hurt credit scores?

People who work hard to maintain good credit might worry about a large number of inquiries on their credit which can negatively impact their credit score. Luckily, most insurance providers carry out “soft checks.” Unlike “hard checks,” soft checks have no effect on a credit score. This is particularly good news for smart consumers who collect multiple quotes before partnering with a specific carrier.

This article was contributed by Carrie Van Brunt-Wiley and Shannon Casey of the HomeownersInsurance.com blog. HomeInsurance.com partners with the leading home and auto insurance providers in the country to shop for the best rates for consumers. It also serves as a resource for industry information, including shopping trends, rates by state and other tips for homeowners.

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46 Comments

  1. Great article about a topic too many ppl dont know enough about. Also demonstrates how your credit report touches so many other parts of your life.

    Mike at 10:05 am on June 6, 2013
  2. So will a high score get me a reduction in my home owners policy cost, if I bring it to their attention?

    Steven M at 7:03 am on June 29, 2013
  3. I am pissed that my homeowners credit rating is poor. I have lived in my home for almost 18 years and I only had to use my insurance once for around $1800. Out of all the money that I pay into it I think it is very sad that my rating looks like this or is based off of other scores. RIDICULOUS!!!

    Tracey S at 8:13 am on August 3, 2013
  4. I think there is something wrong with this rating. I have a 810 credit score and I have never placed a homeowners claim, I’ve lived in this house 3 years and the previous house for 22 years, yet my homeowners credit rating is poor. Nothing in this article suggests I should have such a poor rating. What is going on?

    Bob at 9:03 am on August 17, 2013
  5. You forgot one of my assets/2958 shady lnA2michCitiBank

    Daniel Kekich at 8:40 am on August 22, 2013
  6. Jenna

    Hey Daniel, are you having trouble with your account? If so, please email support@creditkarma.com and we’d be happy to look into your account further.

    Jenna at 9:18 am on August 22, 2013
  7. I KNOW there is something wrong with this rating. I have a (NONE OF YOU BUSINESS) credit score and I have never placed a homeowners claim, I’ve lived in this house 5 years and , yet my homeowners credit rating is FAIR. Nothing in this article suggests I should have such a Change in ratings. What is going on?
    This goes too show Home Insurers’ are scammers and this website is in on it!! How do you go from 909 too 844 in 6 months!!

    Al B at 6:25 pm on August 22, 2013
  8. Jenna

    Al, we don’t calculate the scores you see on our site ourselves– we pull them straight from TransUnion. Because of this, we don’t know why your score has dropped. The best thing you can do is to continue to monitor your score and make good financial moves to improve your score.

    Jenna at 8:15 am on August 23, 2013
  9. Most unfair. I bought my first home in 1996 —was in real estate many years and at one time owned 13 rental homes. Of course, all these properties and my personal residences have always been insured. I’ve NEVER filed a claim!!!!!!!!!!!!!!!! and look at this! This may be a good thing, however, once in the past 12 yrs. an agent said I was insured—cashed my premium check— but had actually NOT insured the property (1796 Duke Road) he would not return my money or answer my calls. I dig get the Ins. commissioner involved (and got my money back) but it may be that my record shows that I was cancelled for non payment of premium????????????? I can prove that did not happen. If this is the case—how can I remedy it?

    ila fossett at 10:58 am on August 25, 2013
  10. I do wonder about this score. I have lived in the same house for 32 years, with various mortgage providers. I have used the same insurer for more than 25 years. I had one claim over ten years ago from water damage due to a faulty siding product, but the siding company went out of business because of the number of claims against them, so my insurance company paid me $1300 for a few inside repairs (they declined to cover siding replacement because of the faulty product. Not much of a claim for over 25 years. I had a chapter 7 bankruptcy two years ago, but my credit is recovering nicely, especially because I have continued to pay my mortgage and insurance bills promptly. My home is in good repair, with repairs, painting, roof and gutter replacement as needed, etc. So I wonder why my credit is fair, my auto insurance is excellent, and my homeowners’ is listed as poor.

    Mary Pace at 2:39 pm on August 25, 2013
  11. “Since only specific parts of a credit score are used to calculate an insurance score, you can’t always predict insurance scores based on overall creditworthiness. While an individual may have an overall pristine credit score, other factors might be lacking. For example if the same homeowner filed multiple homeowners insurance claims in the past few years, their insurance score may be negatively impacted regardless of their creditworthiness.”

    I HAVE NOT SEEN A SINGLE EXPLANATION OF EXACTLY WHAT GOES INTO THIS “INSURANCE SCORE” WHICH DETERMINES IT. SO THIS SCORE SHOULDN’T BE ALLOWED TO INFLUENCE ANYTHING AS IT HAS NOT BEEN JUSTIFIED!

    JP56 at 6:32 am on September 1, 2013
  12. Same story: perfect credit, never a missed payment, lived in same house 22 years and have always had it insured, never filed a claim, house is paid off, and yet house insurance score is poor while credit score is excellent. Sounds like a scam.

    Timothy at 12:34 pm on September 17, 2013
  13. I am having the same problem as others here. I have lived in the same house for 8 years and never filed an insurance claim. I have good credit, even with some medical bills that have marred otherwise perfect credit. I received a “very poor” rating. How could that possibly be??? There is absolutely nothing that is on my report that could predict I would file a home insurance claim. Something very hokey here!

    What?? at 9:25 am on September 25, 2013
  14. This obviously does not take into consideration that we just had a house built and have only lived in it for 3 months and is still under the builders warranty.Just another way to charge consumers more.

    lwilso35 at 12:06 pm on October 21, 2013
  15. There is a description that is right above your credit score on the home insurance credit tab? If you didn’t see it, I have pasted it below. For auto ins and home ins, a poor rating just means you are NOT likely to issue an insurance claim. It does not reflect your payment status.

    Home Insurance Score. This score ranges from 150 to 950. It is calculated using data from your TransUnion credit report and is used primarily by home insurance companies to help assess the likelihood that you’ll file an insurance claim. Learn more about different credit scores.

    Kim at 8:17 am on October 27, 2013
  16. What a crock. I’ve had a perfect record of payments on my mortgage for a decade. Until the Everhome Crime Syndicate bought my BoA loan. When issues with their electronic payments (from their own website) failed, I was proclaimed in default before I even knew the payment was late (one payment that was paid in full the day I learned it was late). This was one month, folks. Then I find my credit rating was hit… from high 700s to 685…and then I notice my home insurance rating was…ready for this? VERY POOR. These people are criminals. They are nothing more than sociopathic organized crime syndicates that have managed to legitimize themselves with the political trash who dance on their strings. It’s a legalized extortion racket.

    Bill W. at 9:42 am on October 27, 2013
  17. You post about ”home insurance” what about “renters insurance”
    not all people have homes, a lot of us have apartments…

    diane at 7:09 pm on November 13, 2013
  18. It’s a complete scam. Other scores in the good-excellent range, this one has never gotten above “poor”. Lived in the same home for 20 years, two claims in that time, last one was 3 years ago for a damaged roof. How is it that making a legitimate claim has anything to do with future claims? It’s a way for companies to get around the insurance regulations that keep them from raising property rates like the do for auto insurance after a claim. Hasn’t a thing to do with your actual credit.

    Keith at 9:58 am on November 27, 2013
  19. I am pissed my home ins score so low.
    I have owned my home for 20 years and had 1to claim.
    This is BS

    Peg at 6:41 pm on December 17, 2013
  20. How is home insurance calculated? Mine is listed as poor but I have never filed a claim in the 6 years I’ve since buying my house. How does one go about to improve it? This doesn’t appear to be right.

    Keith at 8:01 pm on December 18, 2013
  21. This score is crap I have a high credit score. Have had one claim on my house over 5 years ago and my homeowners insurance score is poor? I can’t even find a way to contest it this is truly a rip off and a scam by insurance companies and credit score companies how can this be legal? How can I contest it? This is complete and utter trash. Anyone interested in getting a group letter together to send to stat’s attorney or consumer protection bureau’s!!????

    Jenny at 7:10 am on December 31, 2013
  22. My credit score is in the high 700′s, but my ins score is poor. I have never made a claim on my home owners ins. ????????????????

    Mark at 7:21 am on January 2, 2014
  23. I have had different homes over the last 40 years and never had a claim ever!!!!!!!!! They say i have a poor rating(BS) Why don’t you people on this site help correct this situation as it is a real joke!

    Randy Bradshaw at 6:18 am on January 12, 2014
  24. Mike

    Hey Randy – We can’t change your score for you, but we can suggest you check out our blog and our advice section (https://www.creditkarma.com/all/advice) to find some helpful tips. Thanks for using CK!

    Mike at 10:02 am on January 14, 2014
  25. You just can’t win. I Have a 757 credit score(excellent) but according to Ck my auto insurance score is 825 (fair) and a home insurance score of 795 (poor). I’ve been in my current home 12 years never filed a claim and I haven’t had a claim on my auto for 18 years. There is not one negative thing on my credit to warrant bad scores anywhere and good luck trying to figure it out. It’s nothing but FUBAR…

    Russ at 12:07 pm on January 15, 2014
  26. All home insurance scores are a scam… “Every” person I talk to that has looked at theirs is bad. Not one good one. The good ones don’t even own homes. LOL!!! Insurance is a a scam to charge everyone more to make up for the losses in other parts of the country from real claims from natural disasters. Anything to raise your rates is justified, all the way down to the “home score”

    Patrick at 6:53 am on January 16, 2014
  27. What is with this score, been in current home 15 years (no mortgage)pay all bills on time (haven’t paid credit card interest in over 40 years)only one car loan (couldn’t turn down 1.4% interest) ????????

    Daavid at 1:26 pm on January 18, 2014
  28. I too dont understand why my home owners ins score is poor not only that the score never changes, never filed claim, same ins co over 12 years, never late on pmt, fair credit history, whats the deal???

    marcia at 7:05 am on January 21, 2014
  29. My home insurance score is low, I don’t own a home. WTF

    Steven Schlobohm at 9:42 am on January 26, 2014
  30. I am stunned that I have a “poor” rating for the Home Owners Insurance. I have NEVER placed a claim! How can I get this corrected? My other scores are good – I don’t understand. Some assistance on how to correct this would be wonderful.

    Jane at 8:20 am on February 17, 2014
  31. Mike

    Hi Jane – If you’d like assistance please feel free to email us directly at support@creditkarma.com. Thanks!

    Mike at 3:02 pm on February 17, 2014
  32. I know these scores are a scam. I have been dealing with bad scores for many years. I have tried month after month to stay on top of things, I’ve hired lawyers to help keep them honest. The problem continues to happen because the laws protect the corporations and banks that need a legal way to justify stealing people’ money. I’ve finally come to the conclusion that you will never have scores that are a true reflection of your credit worthiness. My plan is to let the insurance companies fend for themselves. I no longer carry home owners insurance. I let the banks get their own policy to cover their risk. I’ll take my chances with my home when something happens. When something does happen they try to scam you out of paying anyway then a claim or even a conversation about a claim negatively impacts your score! You can not win at their scam.

    Joane at 5:28 am on February 20, 2014
  33. Yeah, my Homeowners Score is also Poor, even though I’ve never filed a claim in my life, have lived at the same address for 7 years, always paid my premiums. My REAL Credit score is always lower than CreditKarma’s, though it’s really good…..around 780…..while this website seems useful, I’m starting to actually doubt it’s existence……..see you at the Homeowners Insurance Poor Rating Meeting……..I also failed to mention that I have no mortgage, as my home is paid for……………Mark in Upstate NY

    Mark at 12:55 pm on February 25, 2014
  34. We have been married @38 years and have owned homes for 35 of those years and have never put in a claim. How can my homeowners score be poor? I don’t get it…. We pay our bills on time and last year before we bought this house we were pretty much debt free. Go figure!!!!!

    Pam Hartley at 3:19 pm on February 27, 2014
  35. I have NEVER filed a home insurance claim and my score is very poor??? What BS! Keep the insurance rates high even though your credit is good!! And how do you get it corrected? I don’t see anywhere you can dispute it!

    Eric at 6:17 pm on March 3, 2014
  36. I also think it is a scam, in a brand new home with 25% equity, excellent credit. vantage “A” and auto insurance scores that is also excellent and I am 728 “Very Poor” on the Homeowners score. Filed one insurance claim in all my years of homeownership, 10 years ago for water damage from a broken pipe. Makes zero sense to me. Luckily I live in California where they cant use these scores to determine your premium.

    Kurt H at 3:09 pm on March 4, 2014
  37. Also upset about the Home Insurance Credit Score. TransUnion indicates that they did not submit this information to CreditKharma and suggests that I contact CreditKharma. Afraid if I say something negative about the integrity of CreditKharma that my credit score will be dropped. Also, my credit score is higher on all the other three credit reporting agencies than on CreditKharma. The TV commercial says they don’t ask for your credit card number, but they sure are connected to the agencies that do…as well as other credit card companies that want your business!

    Emma at 8:51 am on March 8, 2014
  38. This credit score is a load of crap! I have owned two homes totaling over 16 years and never filed a claim yet I have a very poor credit rating?????

    Elizabeth at 6:52 pm on March 9, 2014
  39. Mike

    Hi Emma – If you have any questions about the scores you receive on Credit Karma, please feel free to contact us directly at support@creditkarma.com. Thanks!

    Mike at 10:41 am on March 10, 2014
  40. I don’t understand the Homeowner Insurance Score. Mine is very low but I don’t own a house so I don’t have homeowner insurance. So I get a very low rating because I choice not to own. That totally unfair.

    Deb at 5:18 am on March 13, 2014
  41. What a load of crap. All other scores are in good-excellent range, this one stays “poor” for years. Lived in the same home for 21 years, same insurer for the entire time. This is obviously a way for TransUnion to help their insurance corporation friends boost premiums for no reason at all.

    Keith at 2:46 pm on March 24, 2014
  42. I think this insurance score is a sham. I have excellent credit and all other scores on Credit Karma are classified excellent, except for my Insurance Score, which is a 777. I have lived in the same house for 10 years, have a rental property that I have owned for the past 9 years and owned my previous home for 5 years and have used the same insurance company for all homes. I have NEVVVVVVVVER filed an insurance claim on any property, never missed a payment yet my insurance rating still comes up poor. Not sure what they are using to come up with this number.

    Joe at 5:22 am on April 3, 2014
  43. I have lived in the same house for almost 16 years. Just realized they have this score and I believe mine is totally wrong. I have only had 1 claim but because of my credit score which is pretty much all medical because of health issues they have me in the very poor range at 707. That is just wrong when I have always tried to not make claims and yet had to make one that was beyond my control because of box outside tried to cause fire inside. Caught it before it became a huge problem and insurance only paid out less than $1000.00 and I paid the rest. So I don’t agree with this score.

    Dawn at 11:32 am on April 10, 2014
  44. Are the weighting factors used to calculate the Home Insurance Scores proprietary? It would be nice to know them, as I am at a loss to know why my score is only “fair”, whereas my Credit Score is “excellent”. My Auto Insurance score is “B+”. I have filed 0 claims in 26+ years of homeownership and my rates have doubled within the span of 4 years.

    It would also be beneficial to know the factors, and have access to the data used, so that one could monitor the data and point out any erroneous info (such as one can do with a Credit Report) to determine what may be killing the score.

    Gary at 1:46 pm on April 11, 2014
  45. Correction to above: Auto Insurance score is “very good” (not that it seems to matter).

    Gary at 1:53 pm on April 11, 2014

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