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How Your Credit Score Can Impact Your Home Insurance Rates

Posted Sep 2nd, 2022 in Did You Know?, General, Home Insurance, HOMEINSURANCE, In the News, Insurance Tips, Media, TENANTINSURANCE

Your credit score is used by lenders to gather insights into your financial situation and your potential risk. But how does this impact your home insurance rates? Will you still be able to obtain home insurance with a low credit score? And how can you improve your credit score in the future? Read below to discover everything you need to know about your credit score and how it may impact your home insurance premium.

How Your Credit Score Can Impact Your Home Insurance Rates

What is a Credit Score?

A credit score is a reflection of your credit history and begins when you being to apply for credit or borrow money. It is a three-digit number on a scale from 300 to 900. Equifax and TransUnion are the main two credit bureaus in Canada. They use information from credit card companies, banks, and collection companies to determine your credit score. Your credit score is evaluated by lenders when you apply for a loan or credit. They use your credit score to determine your risk and credit capacity.

What is a Good Credit Score?

In Canada, if your credit score is between 725 to 759 it is thought to be very good. If your credit score is above 760 it is considered an excellent score. If it is below 650, it is then considered to be in the fair to the poor range.

Why is Having a Good Credit Score Important?

If you are applying for a credit card, a loan, a mortgage from a bank, buying or renting a car, applying for an apartment or rental unit, or home insurance, your credit score may be checked.   Having a credit score in the lower range may make it more difficult to access these things. You may not be eligible for discounts may be charged a higher interest rate, need a co-signer, or be denied altogether.

What Determines Your Credit Score?

Numerous variables are used when calculating your credit score, all of which are pulled from your credit report. Each variable is weighed differently, indicating that certain information from your credit report will impact your credit score more than others. Some of the most important factors that determine your credit score include:

Payment History

Your payment history is the biggest factor in your credit score, weighing 35%. Your payment history will display whether you have consistently made your payments in full and on time. If you have missed payments, especially two or more consecutive payments, your credit score may show a significant decrease.

Credit Utilization Ratio

Your credit utilization ratio, sometimes referred to as your debt-to-credit ratio, reflects your debt amount compared to your credit limit. This element is used for 30% of your credit score calculation. Using a high percentage of your available credit regularly, such as 80% of what is available to you, you may experience a decrease in your credit score.  The Government of Canada recommends a ratio of 35% or below.

Credit History Length

Your credit history length accounts for 15% of your credit score calculation. It helps lenders understand whether you have been able to manage your credit well for a long period. The longer the length of your credit history, the better. Therefore it is good to start building your credit score early so that when you do need to borrow, your credit history length will positively impact your score. Even if you don’t have a credit card, you can start to build credit with phone or internet bills and student loans.

Recent Credit Activity

10% of your score will be calculated from your recent credit activity. Applying for new credit will result in a hard credit check, possibly resulting in 10 points being taken off your credit score. Keep reading to find out the difference between soft and hard credit checks below. Your credit score will likely return to a higher score within a few months but applying for many new credit cards or loans within a short period can make a greater negative impact.

Types of Credit

The types of credit you have accounted for 10% of your credit score. This shows lenders the kind of credit you use to help them determine your risk. Having a variety of accounts may help to improve your score.

What are Hard and Soft Credit Checks?

It is well known that credit checks can negatively impact your credit score, however not all credit checks will do this. Hard credit checks will impact your credit score while soft checks will not. A hard credit check is a formal review of your credit report. This is where lenders will evaluate your credit history and report before approving your credit application. Soft credit inquiries are just quick credit score checks that don’t evaluate any other elements of your credit report. A soft credit check typically happens when you’re pre-approved for a credit offer.

How Can You Improve Your Credit Score?

It is possible to better your credit score by following a few tips consistently. Even if you already have a good credit score, follow these tips to make it even better!

The first step in improving your credit score is to be fully informed of what your score is. Your credit score will be listed in your credit report. 

How to Access Your Credit Report


You can access your credit score from TransUnion or Equifax online for free.

By Phone

Equifax will also allow you to request your report by phone, at Tel: 1-800-465-7166. To confirm your identity, you will need to provide your  Social Insurance Number or credit card number.

In Person

Both Equifax and TransUnion will allow you to request your credit report in person by visiting one of their locations. You will need to provide at least 2 pieces of identification

By Mail

Request from Equifax 

Request from TransUnion

For both bureaus, you will need to provide 2 pieces of identification.

Be Aware of How Much Credit You Use

It’s best not to use all the credit available to you every month. Try to keep the amount of credit you use below 35% of the amount of credit available to you.

Set Up Automated Payments

This is a great way to ensure you never miss a payment. Consistently paying all your bills on time will help lead to a better credit score.

Don’t Apply for Too Many New Credit Cards

Applying for a new credit card will be a hard credit check and this will appear on your credit report. If you have numerous credit card inquiries on your credit report, lenders may look at this as a red flag.

Diversify the Types of Credit You Use

Using a mixture of different credit is another great way to improve your credit report. Instead of only having a credit card, using loans and a line of credit can help to diversify your report. However, be sure you can keep track of all your credit and pay all the money you owe back in time.

Don’t Remove Old Credit Cards

If you have an old but fully paid-off credit card, this will show up on your credit report and will help your credit score as it communicates your ability to pay off a credit card.

What is an Insurance Score?

An insurance score, also known as a credit-based insurance score, is a credit rating system that is used by insurance companies. It reflects how likely you are to file an insurance claim. Your score can range from 200-997.  Insurance scores of 500 below are considered poor scores, while scores of 776 and higher are considered excellent. The lower your score, the more you are thought of as a risk to file an insurance claim. Insurance brokers or companies may do a soft credit check when you inquire about a home insurance policy. Your insurance score can affect how much your insurance premium will be.

Your insurance score is calculated using the following information:

-       Payment and credit history

-       Length of credit history

-       Type of credit you currently use

-       Outstanding debt

-       Any bankruptcies

-       Pursuit of new credit

This score is based on information from policyholders who have similar credit characteristics.

Why Do Insurance Companies Use Insurance Scores?

A direct link has been found between one’s credit score and the frequency and severity of filing insurance claims. So, your insurance score is a tool insurance companies use to determine your risk level and resulting insurance premiums.

How Does My Insurance Score Affect My Home Insurance Rates?

Insurance companies may use your insurance score to calculate your home insurance premiums. Usually, your home insurance premium will not be increased even if you don’t have the greatest credit score. However, if you have an excellent score, you may be eligible for insurance discounts which can help lower your premium! These scores are used in tandem with other variables to help determine your home insurance rates, such as location, age of home, your claims history, and more.

Can I Still Get Home Insurance with a Bad Insurance Score?

Since insurance and credit scores are only used in determining whether you will receive discounts on your premium, you will still be able to obtain home insurance even if your scores are lower than ideal. Be sure to consistently work on raising your scores so you can qualify for insurance discounts in the future! You can raise your insurance score in the same ways you can improve your credit score.

Does Your Insurance Score Impact Your Tenant Insurance Premium?

If you are a renter instead of a homeowner, your credit score can also impact your tenant insurance premium, but only in the same way, it would affect home insurance rates. So, if you have a great credit score, you will be more likely to receive insurance premium discounts compared to individuals with lower credit scores.

Youngs Insurance Brokers will assist you in finding the right home insurance or tenant insurance policy for you. By taking your insurance score into account and discovering your specific needs as a homeowner or renter, we will be able to ensure you are covered where it matters most. Talk to your Youngs Insurance Broker today to discover more about our personalized home insurance policies.

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Disclaimer: The information provided on this blog is for educational purposes only and is not intended as professional insurance advice. The coverage, terms, and conditions of each insurance policy are unique and subject to individual circumstances. The information provided does not guarantee the availability or suitability of any insurance policy for your specific needs. You should not rely on the information in the blog as an alternative to professional advice from your insurance broker or insurance company. If you have any specific questions about any insurance matter, please consult a licensed insurance broker for personalized advice and guidance.

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