When you apply for homeowners insurance, there are many different factors that must be calculated to determine what your rates will be or if you are even eligible for coverage. These factors include you past insurance history as it is recorded in your CLUE report, the age and condition of the home, and your credit score, among others. Each factor they use covers a different type of risk, and some of these factors, such as your credit score, can prevent you from getting a standard home policy at all.
Insurance companies use your credit score to determine the amount of financial risk you pose, no matter what type of insurance you are purchasing. Higher credit scores indicate a high level of financial responsibility, which basically means that you can be expected to hold up your end of the contract. In simple English, your credit score lets the insurance company know how likely you will be to make your premium payments on time.
People with a low credit score may not qualify for conventional insurance. This does not mean that you cannot get home insurance, but it does mean that you have to purchase high risk coverage at much higher rates. The idea is that if you are likely to miss a premium or be late making them consistently, then you have to pay more for the coverage.
If you have a medium or low credit score, usually defined as a credit score below 650, then it might be a good idea to look for other ways to bring your rates down to make up for the low credit score. To do this, try things such as installing a home security system that is monitored offsite 24 hours a day, install deadbolts on your ground floor doors and bars in the ground level windows, or even put up a fence around the home. These safety additions will earn you discounts that reduce your rates, but the best solution of all is to find out why your credit score is low and take the steps necessary to bring it back up to 650 or higher.