For people with poor credit, buying a house can be challenging — and expensive. Once you find a lender that’s willing to offer you a mortgage, you’ll probably have a higher interest rate than someone with good credit. And you could also pay significantly more for homeowners insurance.

A NerdWallet rate analysis found that a person with good credit would pay $1,820 per year for homeowners insurance, on average. But in most states, someone with poor credit would see an average premium of $3,525 per year — nearly 94% more.

Each insurer has its own definitions of “good” and “poor” credit, but they’re generally in line with traditional credit score ranges. A good credit score typically falls between 690 and 719, while below 630 is considered a bad score.

Using credit to set homeowners, renters, condo and mobile home insurance prices is not allowed in California, Maryland and Massachusetts.
How credit affects home insurance rates
Since the 1990s, insurance companies have used credit-based insurance scores to help measure how risky someone might be to insure. Companies can use these scores to set your rates or to decide whether to sell you a policy at all.

A credit-based insurance score is similar to a traditional credit score but weighted a bit differently. Both scores look at factors such as how much debt you have and whether you’ve made payments on time.

Unlike your mortgage lender or credit card issuer, insurers generally aren’t using your credit history to judge your ability to pay your premiums. Instead, they’re trying to predict how likely you are to file a claim. Studies have shown that those with lower credit-based insurance scores are responsible for a higher share of claim payouts.

A greater chance of filing a claim means a greater risk for the insurance company — and a higher rate for you.

» MORE: The cheapest homeowners insurance

Below you can see how much more homeowners with poor credit can expect to pay in your state. (We didn’t include states where insurers can’t take credit scores into account when pricing policies.)

Rates reflect the average annual cost of homeowners insurance for a policy with $300,000 in dwelling coverage, $300,000 in liability coverage and a $1,000 deductible.

State

Good credit

Poor credit

Difference

Alabama

$2,385

$4,420

85%

Alaska

$1,325

$1,835

39%

Arizona

$1,530

$3,125

104%

Arkansas

$3,020

$6,850

127%

Colorado

$2,580

$4,825

87%

Connecticut

$1,405

$2,780

98%

Delaware

$875

$1,815

107%

Florida

$2,385

$3,295

38%

Georgia

$2,080

$4,010

93%

Hawaii

$490

$550

12%

Idaho

$1,165

$2,195

88%

Illinois

$1,670

$4,180

150%

Indiana

$1,610

$3,265

103%

Iowa

$1,790

$3,575

100%

Kansas

$2,955

$5,195

76%

Kentucky

$2,370

$4,625

95%

Louisiana

$2,675

$4,320

62%

Maine

$1,020

$2,085

104%

Michigan

$1,345

$3,580

166%

Minnesota

$1,685

$3,985

137%

Mississippi

$2,510

$5,640

125%

Missouri

$2,735

$5,510

102%

Montana

$2,065

$4,405

113%

Nebraska

$3,710

$6,815

84%

Nevada

$1,065

$2,585

143%

New Hampshire

$865

$1,500

73%

New Jersey

$965

$1,705

77%

New Mexico

$1,790

$3,065

71%

New York

$1,365

$2,170

59%

North Carolina

$2,325

$4,195

80%

North Dakota

$2,065

$3,405

65%

Ohio

$1,140

$2,775

143%

Oklahoma

$4,365

$9,510

118%

Oregon

$1,105

$2,565

132%

Pennsylvania

$995

$2,910

193%

Rhode Island

$1,280

$2,385

86%

South Carolina

$2,055

$3,840

87%

South Dakota

$2,605

$5,165

98%

Tennessee

$1,980

$4,260

115%

Texas

$3,875

$6,855

77%

Utah

$950

$1,940

104%

Vermont

$815

$1,705

109%

Virginia

$1,190

$2,785

134%

Washington

$1,215

$1,390

14%

Washington, D.C.

$995

$2,045

106%

West Virginia

$1,205

$3,320

176%

Wisconsin

$1,125

$2,680

138%

Wyoming

$1,685

$3,110

85%

Is it fair to use credit history to set home insurance rates?
Some consumer advocacy organizations have spoken out against the use of credit in setting insurance rates. They argue that the practice has an unfair impact on people of color, who often have lower credit scores than white people, as a group.

The COVID-19 pandemic only worsened this racial gap. Minority households were more likely to lose employment income and to struggle with making mortgage payments during the pandemic, according to a study from Harvard University’s Joint Center for Housing Studies
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.

To ease the financial impact of the pandemic, some state insurance commissioners took steps to minimize the role of credit in insuring pricing. For example, in Nevada, an insurer can’t raise your premium or deny you coverage based on credit score changes until May 20, 2024.

In Washington, the insurance commissioner attempted to set a three-year moratorium on using credit information to set rates for auto, homeowners or renters insurance. However, a judge later struck down the ban. A bill along similar lines hasn’t made it out of the legislature.

» MORE: How to buy a house with bad credit

The most affordable companies for homeowners with poor credit
Each insurance company uses its own complex formula to set homeowners insurance rates, so people with poor credit may pay less with some companies than with others. Below are a few major insurers’ average annual rates for homeowners with poor credit.