Personal Finance

Poor credit can cost you as much as 288% more on homeowner's insurance

Filing a claim isn't the only thing that can cause your homeowners insurance rate to spike. Paying your credit card bill late can do some serious damage, too.

That's because underwriters often use a credit-based insurance score to set your premium, which looks at things like debt and late payments, among other factors.

"It's not intuitive that how I handle my credit card can affect things like my auto or home insurance," Peter Kochenburger, deputy director of the University of Connecticut's Insurance Law Center, told CNBC.

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Having a fair credit score can result in rates that are an average 36 percent higher than what people with excellent scores pay, according to a new study. The penalty is even more dramatic for those with poor credit — who pay an average 114 percent more than people with excellent credit.

(Credit scores range from 300 to 850, and the higher the better. In 2015, according to, more than half of Americans had a FICO score that is 700 or greater — typically enough to get some of the best rates on a loan or credit card.)

But in some states, you're lucky if you're paying 36 percent — or even 114 percent — more. (See charts below .)

Experts say this is another reason why it's smart to shop around for homeowners insurance.

"Insurers don't always use the same methodology in utilizing credit scores, and it pays to shop around, ask an insurance agent, or also talk to your state insurance department about the use of credit scores," said Kochenburger.

Improving your credit can help you see better offers the next time you re-shop your insurance, said Loretta Worters, a vice president at the Insurance Information Institute.

"To protect your credit, pay bills on time, don't obtain more credit than you need and keep your credit balances as low as possible," she said.

Look for other opportunities to cut premiums, too. Purchasing your home and auto insurance from the same insurer may help get you a 5 percent to 15 percent discount on your premium, said Worters. Home improvements, like a home security system, can also yield better rates.