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The high cost of a low credit score

In the study, Matic found homeowners with low or middling credit scores were facing much higher premiums and much higher price hikes.

Those with the lowest scores paid an average of $300 per year more than people with great credit and saw an average hike of $85 this year.

Credit scores vs. premiums
FICO Score Avg. premium 2019/2020 Avg. premium 2020/2021 Change
Less than 580 $1,327 $1,412 6.4%
580-669 $1,237 $1,304 5.4%
670-739 $1,164 $1,208 3.8%
740-799 $1,082 $1,133 4.7%
More than 800 $1,061 $1,098 3.5%

What’s the connection? Many insurers rely on credit data to set the premiums you pay, as research suggests the factors that lower your credit score (debt, late payments, collections and bankruptcies) also increase your risk of filing an insurance claim.

While a few states don’t allow companies to use an applicant’s credit score when calculating their premiums, your insurer might still be allowed to tally up an “insurance score” based on similar data in your credit report.

If you don’t know your credit score — and you should, if you want to get a decent loan or save money by refinancing your mortgage — you can check it online for free.

You have a few options to boost a lackluster score, but the biggest factors are your payment history and outstanding debt.

Stop overpaying for home insurance

Home insurance is an essential expense – one that can often be pricey. You can lower your monthly recurring expenses by finding a more economical alternative for home insurance.

Officialhomeinsurance can help you do just that. Their online marketplace of vetted home insurance providers allows you to quickly shop around for rates from the country’s top insurance companies, and ensure you’re paying the lowest price possible for your home insurance.

Explore better rates

Seniors struggling with high rates

While the over-63 age group isn’t paying the highest premiums — that fate falls to the 43-to-55 bracket — they are paying way more than they have to.

Matic found that seniors are overpaying by an average of $751 per year simply because they aren’t actively monitoring, reviewing and adjusting their insurance policies.

Savings when shopping around, by age
Age bracket Avg. premium 2020/2021 Avg. savings 2020/2021
Under 27 $919 $329
27-34 $1,047 $389
35-42 $1,133 $454
43-55 $1,243 $625
56-62 $1,221 $573
Over 63 $1,183 $751

Some insurers do offer loyalty discounts to people who renew with them, but the savings are often miniscule compared to the benefit of shopping around for a lower rate.

One of the best opportunities for savings on a home policy is living in the home for more than 20 years, Matic says, and people who can capitalize should ensure their insurer is rewarding them properly.

And it’s not just seniors overpaying for their insurance coverage. Matic notes that even people younger than 27, who are paying the lowest premiums overall, could find savings of around $330 a year by comparing offers.

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Sigrid Forberg Associate Editor

Sigrid’s is Moneywise.com's associate editor, and she has also worked as a reporter and staff writer on the Moneywise team.

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