How Poor Credit Could Raise Your Renters Insurance Rates

Having poor credit could make your renters insurance nearly twice as expensive.
May 24, 2021

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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 83% higher than those for people with good credit in states where credit is used 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, Massachusetts or Washington.

How credit affects renters insurance rates

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

Your insurance score is similar, but not identical, to the credit score banks evaluate when you apply for a credit card or loan. Both scores incorporate the same factors, such as payment history and outstanding 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 managing 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, in part because of the disproportionate effect 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, 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 has 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.

Some states have called a temporary halt to the practice to avoid penalizing those who’ve had financial troubles during the pandemic. Earlier this year, Nevada made it illegal for insurers to deny coverage or increase premiums based on credit score changes on or after March 1, 2020. And Washington’s insurance commissioner recently introduced a three-year moratorium on using credit information to price auto, home and renters insurance.

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 reduce 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, you must be notified if your credit data contributed to an “adverse action” such as a higher rate. If this happens, review your credit report promptly and dispute any errors you find.

Shop around. Each insurer has its own pricing formula, so it’s worth getting quotes from at least three different 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.


NerdWallet averaged rates for 30-year-old men and women for a variety of insurance companies in every ZIP code where credit is permitted as a rating factor for insurance. Sample tenants were nonsmokers 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.

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