How are credit scores of homeowners checked or determined by insurance companies?

 

The insurance score basically refers to numerical ranking of the homeowner and this is based on the credit rating and credit history among other factors. The insurance score is calculated because there is a relation between negative credit ratings of individuals and the possibility of filling insurance claims. Individuals with low credit scores pose a superior risk to the insurance companies and those with better credit scores are also more likely to make timely premium payments.

The credit scores allow insurance companies to make an accurate assessment of risk. This in turn ensures that the premium is set at correct rates for different customers. In the absence of such evaluation homeowners would be required to pay premiums at average rates, which would be on the higher side for homeowners having a solid credit rating. Even though home owners with low credit rating would have to pay a premium at increased rates, they can lower their premium amounts in several ways. Maintaining the roof, fixing any damages, paying attention to the plumbing, flooring, and so on can help homeowners in many ways, certainly in reducing their monthly premium payment. Having safety features such as smoke alarms, deadbolts on the doors, and burglar alarms, can help homeowners receive additional discounts as well. Homeowners can also obtain or qualify for a claims discount if they exhibit a claims free record for a certain period of time.

Homeowners with a low credit score should also try to resolve any negative aspects and try to improve their credit score. A regular payment in terms of their mortgage loan, for example, can help in achieving a credit score enhancement.