Best cheap homeowners insurance for people with bad credit

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An analysis of average home insurance rates for bad credit found that Allstate is the cheapest option, at an average of $4,585 a year, followed by Nationwide and Progressive.

It may surprise you that your credit score affects your homeowners insurance rates. Since there is a correlation between a low credit score and increased claims, many insurance companies charge higher rates to customers with bad credit.

Each insurer looks at credit scores differently, so it’s possible to find cheap homeowners insurance, regardless of your score. Additionally, a few states have outlawed using your credit score when calculating insurance rates.

If you’re shopping for home insurance with a poor credit score, you have options to find an affordable rate and improve your credit for lower rates in the future.

Cheapest homeowners insurance for people with bad credit

While bad credit doesn’t mean that insurance companies will deny coverage, it does mean that your rates may be higher. Since studies have shown that people with lower credit scores are more likely to file claims, insurance companies increase rates to offset the risk.

However, not all home insurance companies look at credit scores the same. Each company creates its own formula to determine rates, so costs vary widely.

This table lists the best cheap homeowners insurance for people with bad credit. Allstate offers the lowest rates regardless of credit score. However, Allstate customers with bad credit still pay more than double that of customers with good credit.

*USAA only offers insurance to military members, veterans and their families

How Insure.com found the cheapest home insurance providers for people with bad credit

Insure.com analyzed rates provided by Quadrant Data Services for home insurance with a sample coverage level of $300,000 for dwelling and liability and a $1,000 deductible. Rates were fielded for people with both good and poor credit ratings.

We looked at sample rates gathered from 34,588 ZIP codes and 82 insurance companies to calculate the average rates at each credit tier and the rate differences.

How does credit score affect home insurance?

While your credit score affects your home loan, you might not know that it also affects your homeowners insurance rates. Most insurers use your credit score and other risk factors to create your credit-based insurance score. This score, in turn, affects your insurance rates.

Homeowners with lower credit scores typically pay higher insurance rates. Statistically, people with low credit scores are more likely to file claims, may not make timely payments and have other risky money management habits. 

“Although United Policyholders (UP) has long opposed insurers’ use of credit scores for underwriting and rate setting as unfairly penalizing people for factors out of their control, insurers have succeeded in convincing regulators and lawmakers in all but a handful of states that credit scores are predictive and they should be allowed to use them. Not all insurers use them, but most do,” says Amy Bach, Esq., executive director of United Policyholders, a nonprofit company that helps consumers understand all aspects of insurance in the U.S.

UP advises consumers to do the following:  

• Request copies of your free credit report annually and correct any errors you find.
• Ask your current insurer what discounts you may qualify for and provide them with documentation on your eligibility.

Additionally, some states don’t support the correlation between poor credit and insurance as a factor in rating. States that don’t allow insurance companies to consider credit scores when determining rates include:

• California
• Hawaii
• Massachusetts

This table breaks down the rate differences in each state based on credit scores. While some states have moderate rate increases for homeowners with poor credit, other states, like Montana, can see rates around five times higher than those with excellent credit.

Even homeowners with good or fair credit pay higher rates than those with excellent credit. 

Your credit score isn’t the only factor affecting homeowners insurance rates. Other factors, such as the age and condition of your home, crime statistics for your area, and weather-related events, can also affect rates.

Can you get cheap homeowners insurance with bad credit?

Fortunately, there are ways to get cheap homeowners insurance, even with bad credit. Ways to lower homeowners rates include:

• Raise your deductible. A higher deductible means more out-of-pocket costs if you file a claim, but rates stay lower overall. Make sure you can afford your deductible.
• Reconsider filing a claim. Since claims can increase your rates, carefully consider if you need to involve the insurance company. If you can pay for repairs yourself without filing a claim, you can keep a lower insurance rate.
• Take a close look at your coverage. Ensure that your coverage limits aren’t higher than you need, and remove coverage you don’t need. 
• Look for home insurance discounts. Many insurance companies offer savings if you bundle policies or add safety features to your home, such as an alarm or smart home device.
• Shop around. Each insurance company looks at factors differently. For example, one insurer may emphasize credit scores, while another may offer lower rates for extra safety features. Compare the same coverages and deductibles to find the lowest rate available.

As you can see from the data above, not all companies look at your credit score similarly. Although Allstate is the cheapest company for homeowners with bad credit, Travelers charges about four times more.

Tips to improve your credit score for better home insurance rates

Improving your credit score lowers your insurance rates and can reduce home loans, car notes, and other credit-based inquiries as well. Ways to improve your credit score include:

• Pay bills on time. Late payments negatively affect your credit score, and insurance companies like to see you make timely payments.
• Pay your credit cards off each month. How much credit you use affects your score. Maxing out your credit cards may lower your score, even if you make on-time payments. Keeping a healthy amount of credit available improves your rating.
• Don’t apply for new accounts often. Each hard credit check lowers your credit score, and applying for multiple accounts in a short period can tank your score quickly. Be strategic and only apply for a new account when you need it.
• Diversify your credit accounts. For example, credit companies look at home loans more favorably than credit cards.
• Check your credit report often. Mistakes happen, even on your credit report. The quicker you correct errors on your report, the faster your score improves. You can get your credit report for free three times a year, and many credit card companies allow you to check more often.

Working to improve your credit score comes with benefits, such as lower bills and added peace of mind.

What our expert says

Q: Why does credit affect home insurance?

Amy BachExecutive Director of United Policyholders

“Although United Policyholders has long opposed insurers' use of credit scores for underwriting and rate setting as unfairly penalizing people for factors out of their control, insurers have succeeded in convincing regulators and lawmakers in all but a handful of states that credit scores are predictive and they should be allowed to use them. Not all insurers use them, but most do.”

Methodology

Insure.com analyzed home insurance rates in 2024 fielded by Quadrant Data Services. Rates are based on $300,000 in dwelling coverage and liability and a $1,000 deductible and were requested for several credit tiers, including good or none in states where it can’t be used and poor. Rates were fielded in 34,588 ZIP codes from 82 insurance companies.

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