How Poor Credit Could Raise Your Renters Insurance Rates

Having poor credit could make your renters insurance significantly more expensive.
Sarah Schlichter
By Sarah Schlichter 
Edited by Caitlin Constantine

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The price you pay for renters insurance depends on where you live, how much coverage you choose and whether you’ve filed any previous claims. But in most states, your rate is also influenced by your credit history — and it can make a surprisingly big difference.

On average, renters insurance rates for people with poor credit are 66% higher than those for people with good credit in states where insurers use credit as a rating factor, NerdWallet found in a recent analysis. (What’s considered a poor or good score varies by insurer, but these scores are generally in line with FICO credit score ranges.)

Using credit to set prices for renters or other types of home insurance is currently not permitted in California, Maryland or Massachusetts.

How credit affects renters insurance rates

Since the 1990s, insurers have used credit-based insurance scores to help set rates and decide which people they’re willing to insure.

Your insurance score is similar, but not identical, to the credit score banks check when you apply for a credit card or loan. Both scores incorporate the same factors, such as payment history and unpaid debt, but they’re weighted a little differently. If you have a poor credit score, your insurance score is likely low as well.

You might not think the way you manage money has anything to do with how likely you are to file an insurance claim, but studies have shown a correlation. Those with lower credit-based insurance scores are more likely to file claims than those with higher scores.

The result? In most states, those with poor credit often end up paying significantly more for insurance.

“The insurance companies want to accurately predict the chance of a [claim] so that everyone’s premiums are accurate and fair,” says Christine Barlow, a chartered property casualty underwriter and executive editor at FC&S Expert Coverage Interpretation. If someone is more likely to file a claim, she says, “logically they should pay more for insurance.”

Are credit-based insurance scores fair?

Even if your insurance score does accurately predict whether you’ll file a claim, using it as a pricing factor has become increasingly controversial. That's partly because of the disproportionate effect the practice has on lower-income and minority populations.

“People with bad credit pay a lot more, and that [makes] life a little bit harder for poor people,” says Bob Hunter, a former director of insurance at the Consumer Federation of America. “Because of the demographics in the country, that means it’s also harder for [many] people of color.”

The COVID-19 pandemic intensified such hardships, with Black and Hispanic populations seeing higher rates of unemployment than white workers.

“Using credit score for premiums only exacerbates [income] disparity, especially amid the pandemic as many face unemployment or underemployment,” said Naeem Siddiqi, a senior advisor and credit risk expert at analytics firm SAS, in an email.

How to find cheaper renters insurance

Those with poor credit don’t need to settle for sky-high rates or go without renters insurance altogether. These tips can help cut your cost.

Check your credit reports. If your premium goes up, ask the insurance company to explain why, Siddiqi said. Under the Fair Credit Reporting Act, the insurer must notify you if your credit data contributed to an “adverse action” such as a higher rate. If this happens, look at your credit report promptly and dispute any errors you find.

Shop around. Each insurer has its own pricing formula, so get quotes from at least three companies to make sure you’re getting the best deal. Barlow recommends working with an independent insurance agent who can shop around on your behalf.

Look for discounts. You could save money by bundling your renters and car insurance policies with the same company or by letting your insurer know if your home has an alarm system, says Alan Umaly, president of Westwood Insurance Agency. Other discounts may be available for paying in full upfront or signing up for autopay.

Raise your deductible. A deductible is the amount that’s subtracted from your insurance payout if you ever file a claim. Choosing a higher deductible can reduce your premium — though it might not be worth it if you’d have trouble covering that deductible in the event of a claim.

Improve your credit. Paying bills on time and reducing debt can help you build credit over time and eventually qualify for lower insurance rates. For instance, you could try reporting your rent payments to the credit bureaus.


To find the average cost of renters insurance in the U.S., NerdWallet calculated the median rate for 30-year-old tenants from multiple insurance companies in every ZIP code across all 50 states and Washington, D.C. Sample tenants were nonsmokers with good credit living in a two-bedroom apartment. They had a $500 deductible and the following coverage limits:

  • $30,000 in personal property coverage.

  • $100,000 in liability coverage.

  • $10,000 in additional living expenses coverage.

  • $1,000 in medical payments coverage.

We made minor changes to the sample policy in cases where rates for the above coverage limits or deductibles weren’t available.

We changed the credit tier from “good” to “poor” as reported to the insurer to see rates for renters with poor credit. In states where credit isn’t taken into account, we used only rates for “good” credit. Our “good” and “poor” credit rates are based on credit score approximations and do not account for proprietary scoring criteria used by insurance providers.

These are sample rates generated through Quadrant Information Services. Your own rates will be different.

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