What Is an Insurance Score and How Is It Different From Your Credit Score?
If you’ve ever shopped for homeowners’ insurance, you may have heard the term “insurance score” and wondered how it differs from your regular credit score. They sound similar, but they serve different purposes. Here’s what you need to know.
What Is a Home Insurance Score?
Your home insurance score is a number that represents how likely you are to file a home insurance claim. Insurance companies use it to assess risk — and ultimately, to determine how much you’ll pay for your homeowners insurance policy.
To calculate your insurance score, insurers look at two main categories of information:
- Your insurance history — including any claims that have previously been paid out
- Your credit history — which gets run through a proprietary algorithm alongside your insurance data
How Is It Different From a Credit Score?
While your credit score and insurance score share some of the same inputs, they’re used for very different purposes.
A credit score is a three-digit number that tells lenders how likely you are to repay a loan on time. It’s based on factors like:
- Your total debt
- Number of open lines of credit
- Payment history
An insurance score takes those same credit factors into account, but also layers in additional variables specific to insurance risk, such as:
- Claim history
- Home safety features
- Fire protection class
- And a few other factors, depending on the insurer
Lenders want to know if you’ll pay back what you borrow. Insurance companies want to know something a little different — how much you’re likely to cost them over time. Insurers have found a consistent trend: people with higher credit scores tend to file fewer claims, which is why your credit history factors into the equation.
Does Getting an Insurance Score Hurt Your Credit?
No — and this is an important distinction. Because insurance scores are governed by the Fair Credit Reporting Act, pulling your insurance score is not considered a hard inquiry on your credit report. That means it won’t negatively impact your credit score, which is good news since too many hard inquiries can bring your score down.
How to Improve Your Insurance Score
Since your insurance score is partially based on your credit history, many of the same habits that help your credit score will help your insurance score too. Here are a few steps you can take:
- Pay all bills on time. Payment history is one of the most influential factors in your credit profile.
- Keep your debt as low as possible. Lower debt-to-income ratios signal financial responsibility.
- Pay off existing debt. Reducing outstanding balances improves your overall credit picture.
- Be strategic about filing claims. Before filing, consider whether the payout is worth it. A history of frequent claims can hurt your insurance score over time.
The Bottom Line
Your insurance score and your credit score are related, but they’re not the same thing. Insurance companies use your credit history as one piece of a larger puzzle to assess your risk as a policyholder. The good news? Healthy financial habits benefit both scores. So the next time you’re getting a quote on homeowners insurance, remember that your credit history is playing a bigger role than you might think.
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