Whether it’s getting a better interest rate when buying a home or a better rate on your homeowners insurance, a good credit score does matter.
I’m sure you’ve already heard that having a good credit score is a major factor when buying a house because it impacts the interest rate you get on your mortgage. Depending on how much you plan to finance, even just a few credit score points can mean a slightly higher interest rate. Over the life of a loan, that could add thousands of dollars of interest.
One thing you might not think about is the impact a lower credit score can have on homeowners insurance. On average, the insurance tacks on at least another $100 to your monthly expenses. But realtor.com says you could end up paying higher insurance premiums as a result of not having a good credit score. Poor credit vs. excellent credit can mean paying twice as much for homeowners insurance.
Realtor.com says, “Most states allow insurance underwriters to consider credit history when determining home insurance premiums. Insurance underwriters generally use credit-based insurance scores, according to the report from InsuranceQuotes.com, and those scores are based on credit report data such as outstanding debt, length of credit history, late payments, collection accounts, bankruptcy, and credit applications.”
Anything you can do to keep the costs down when becoming a homeowner, most likely, will add up to a lot of savings down-the-road. However, if you end up not getting the best insurance rate, you can always ask your insurer to reassess your premium later on after you’ve had time to improve your credit. It also never hurts to shop around for a new policy since underwriting practices vary by insurer. To keep tabs on your credit score, credit.com offers free credit scores every 30 days.