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For people with poor credit, buying a house can be challenging — and expensive. Once you find a lender that’s willing to offer you a mortgage, you’ll probably have a higher interest rate than someone with good credit. And you could also pay significantly more for homeowners insurance.
A NerdWallet rate analysis found that a person with good credit would pay $1,915 per year for homeowners insurance, on average. But in most states, someone with poor credit would see an average premium of $3,320 per year — more than 73% more.
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Each insurer has its own definitions of “good” and “poor” credit, but they’re generally in line with traditional credit score ranges. A good credit score typically falls between 690 and 719, while below 630 is considered a bad score.
Using credit to set homeowners, renters, condo and mobile home insurance prices is not allowed in California, Maryland and Massachusetts.
How credit affects home insurance rates
Since the 1990s, insurance companies have used credit-based insurance scores to help measure how risky someone might be to insure. Companies can use these scores to set your rates or to decide whether to sell you a policy at all.
A credit-based insurance score is similar to a traditional credit score but weighted a bit differently. Both scores look at factors such as how much debt you have and whether you’ve made payments on time.
Unlike your mortgage lender or credit card issuer, insurers generally aren’t using your credit history to judge your ability to pay your premiums. Instead, they’re trying to predict how likely you are to file a claim. Studies have shown that those with lower credit-based insurance scores are responsible for a higher share of claim payouts.
A greater chance of filing a claim means a greater risk for the insurance company — and a higher rate for you.
» MORE: The cheapest homeowners insurance
Below you can see how much more homeowners with poor credit can expect to pay in your state. (We didn’t include states where insurers can’t take credit scores into account when pricing policies.)
Rates reflect the average annual cost of homeowners insurance for a policy with $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 the use of credit in setting insurance rates. They argue that the practice has an unfair impact on people of color, who often have lower credit scores than white people, as a group.
The COVID-19 pandemic only worsened this racial gap. Minority households were more likely to lose employment income and to struggle with making mortgage payments during the pandemic, according to a study from Harvard University’s Joint Center for Housing Studies.
» MORE: How to buy a house with bad credit
The most affordable companies for homeowners with poor credit
Each insurance company uses its own complex formula to set homeowners insurance rates, so people with poor credit may pay less with some companies than with others. Below are a few major insurers’ average annual rates for homeowners with poor credit.
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. | |
» MORE: The best homeowners insurance companies
How to pay less for homeowners insurance
Shop around. The best way to find more affordable insurance is to check rates from multiple companies. You can get homeowners insurance quotes online or ask an independent agent to shop around on your behalf. Double-check that each quote has similar coverage amounts and deductibles to ensure a fair comparison.
Improve your credit. In the longer term, improving your credit can save you hundreds of dollars a year on homeowners insurance. Paying your bills on time and using less of your available credit can help. Learn more about restoring your credit.
Ask about discounts. Check with your insurer or agent to make sure you’re getting all the home insurance discounts you’re eligible for. Many carriers offer savings if you bundle multiple policies (such as homeowners and auto) or have protective devices such as burglar alarms or smoke detectors.
For more tips, see how to lower your home insurance cost.
Frequently asked questions
Does your credit score affect other insurance rates?
In most states, insurance companies use your credit-based insurance score to set rates for auto and renters insurance as well as homeowners insurance. A good driver with poor credit will pay significantly more for car insurance than the same driver with a good credit score, according to a NerdWallet analysis.
See how poor credit can raise renters insurance rates.
Does getting homeowners insurance quotes affect your credit score?
When you shop for insurance in most states, an insurance company will do a “soft” inquiry, which doesn’t affect your credit score. That’s different from a hard inquiry, a more thorough review of your credit that can take your score down by a few points. Learn more about hard and soft credit inquiries.
What credit score do I need to buy a house?
It varies depending on your down payment and the type of loan you get, but could be as low as 500. See the credit score needed to buy a house.
