Purchasing a house with bad credit can be difficult and costly. If you locate a lender ready to lend to you, your interest rate will most likely be greater than that of someone with good credit. You could potentially pay much more for homeowner’s insurance.
According to a Reliableinsurance pricing analysis, a person with good credit pays $1,915 per year for homeowners insurance on average. However, in most states, someone with poor credit would pay an average annual premium of $3,320, which is more than 73% higher.
Each insurer has its own definition of “good” and “poor” credit, but they generally correspond to traditional credit score ranges. A respectable credit score is normally between 690 and 719, whereas anything below 630 is considered terrible.
California, Maryland, and Massachusetts do not allow the use of credit to set homeowner, renters, condo, or mobile home insurance costs.
How credit affects home insurance rates
Since the 1990s, insurance companies have employed credit-based insurance ratings to assess how risky someone is to insure. Companies can use these scores to determine your prices or whether to sell you a policy at all.
A credit-based insurance score is comparable to a standard credit score, but weighted slightly differently. Both ratings consider elements such as how much debt you have and whether you have made your payments on time.
Unlike your mortgage lender or credit card provider, insurers do not use your credit history to determine your capacity to pay your premiums. Instead, they want to know how likely you are to file a claim. According to studies, persons with poorer credit-based insurance scores account for a larger share of claim payouts.
A higher likelihood of filing a claim equals more risk for the insurance company—and a higher rate for you.
The chart below shows how much more homeowners with poor credit might anticipate to pay in your state. (We excluded states where insurers cannot include credit scores when pricing insurance.)
The rates represent the average yearly cost of homeowners insurance for a policy that includes $300,000 in dwelling coverage, $300,000 in liability coverage, and a $1,000 deductible.
| State | Good credit | Poor credit | Difference |
| Alabama | $3,140 | $5,475 | 74% |
| Alaska | $1,160 | $1,770 | 53% |
| Arizona | $2,135 | $3,940 | 85% |
| Arkansas | $3,355 | $6,175 | 84% |
| Colorado | $3,820 | $6,520 | 71% |
| Connecticut | $1,575 | $3,095 | 97% |
| Delaware | $860 | $2,175 | 153% |
| Florida | $2,625 | $3,685 | 40% |
| Georgia | $2,345 | $4,340 | 85% |
| Hawaii | $515 | $540 | 5% |
| Idaho | $1,510 | $2,515 | 67% |
| Illinois | $2,060 | $4,100 | 99% |
| Indiana | $1,975 | $4,190 | 112% |
| Iowa | $2,215 | $4,100 | 85% |
| Kansas | $3,570 | $6,075 | 70% |
| Kentucky | $2,190 | $4,105 | 87% |
| Louisiana | $2,240 | $4,010 | 79% |
| Maine | $1,075 | $2,075 | 93% |
| Michigan | $1,785 | $3,240 | 82% |
| Minnesota | $2,375 | $4,090 | 72% |
| Mississippi | $3,475 | $6,775 | 95% |
| Missouri | $2,905 | $6,075 | 109% |
| Montana | $2,605 | $5,505 | 111% |
| Nebraska | $4,135 | $6,395 | 55% |
| Nevada | $1,290 | $2,485 | 93% |
| New Hampshire | $1,000 | $1,890 | 89% |
| New Jersey | $1,150 | $2,240 | 95% |
| New Mexico | $1,595 | $3,575 | 124% |
| New York | $1,715 | $2,455 | 43% |
| North Carolina | $1,975 | $3,645 | 85% |
| North Dakota | $2,445 | $4,040 | 65% |
| Ohio | $1,390 | $2,775 | 100% |
| Oklahoma | $5,495 | $12,180 | 122% |
| Oregon | $1,255 | $2,720 | 117% |
| Pennsylvania | $1,410 | $2,855 | 102% |
| Rhode Island | $2,070 | $3,495 | 69% |
| South Carolina | $2,250 | $4,010 | 78% |
| South Dakota | $2,810 | $5,060 | 80% |
| Tennessee | $2,435 | $5,710 | 134% |
| Texas | $4,400 | $7,705 | 75% |
| Utah | $1,140 | $2,415 | 112% |
| Vermont | $870 | $1,530 | 76% |
| Virginia | $1,445 | $2,905 | 101% |
| Washington | $1,225 | $1,495 | 22% |
| Washington, D.C. | $1,190 | $2,235 | 88% |
| West Virginia | $1,600 | $3,885 | 143% |
| Wisconsin | $1,300 | $2,565 | 97% |
| Wyoming | $1,555 | $2,900 | 86% |
Is it fair to use credit history to set home insurance rates?
Some consumer advocacy organizations have spoken out against using credit to calculate insurance pricing. They say that the practice has an unfair impact on people of color, who frequently have worse credit scores than white people as a group.
The COVID-19 epidemic exacerbated this racial disparity. Minority households were more likely to lose employment income and struggle to make mortgage payments during the epidemic, according to a report by Harvard University’s Joint Center for Housing Studies.
The most affordable companies for homeowners with poor credit
Each insurance company has its own unique system for determining homeowners insurance rates, so those with poor credit may pay less with certain firms than others. The typical annual premiums for homeowners with poor credit from a few large insurers are listed below.
| Company | Average annual rate |
| Progressive | $2,940 |
| Travelers | $3,410 |
| Nationwide | $3,660 |
| Allstate | $3,725 |
| Encompass | $3,835 |
| American Family | $4,070 |
| Farmers | $4,125 |
| State Farm | $4,470 |
| Auto-Owners | $5,035 |
| USAA* | $3,935 |
| *USAA homeowners policies are available only to active military, veterans and their families. | |
How to pay less for homeowners insurance
Shop around. The greatest approach to find more affordable insurance is to compare quotes from multiple firms. You can compare homeowners insurance quotes online or have an independent agent shop around on your behalf. Check that each quote has comparable coverage amounts and deductibles to provide a fair comparison.
Improve your credit. In the long run, increasing your credit score can save you hundreds of dollars every year on homeowners insurance. Paying your bills on time and utilizing less of your credit limit can assist. Find out more about rebuilding your credit.
Inquire about discounts. Check with your insurer or agent to ensure you are receiving all of the home insurance discounts you are entitled to. Many carriers provide discounts if you combine multiple policies (like as homeowners and cars) or have security equipment like burglar alarms or smoke detectors.
