Unbeknownst to many consumers, credit scores can play a significant role in determining personal lines insurance rates. Especially in home insurance, insurers will often use credit-based insurance (CBI) scores when setting rates, in addition to other factors including location, type of home, claims history, and more. Similar to a credit score, CBI scores are developed by FICO and consider a range of credit characteristics, says the Insurance Information Institute (I.I.I). Outstanding debt, credit history, payment history, types of credit, and other factors are considered, each with an assigned weight. Once calculated together, a lower CBI score translates to a higher risk for the insurer — and usually a higher premium for the consumer. "Insurance companies often use insurance scores because actuarial studies suggest that how a person manages his or her financial affairs, which is what these scores indicate, is a good predictor of insurance claims," says the I.I.I. "Statistically, people with a poor insurance score are more likely to file a claim. This allows carriers to better match insurance premiums with the risk that an individual insured might pose, helping prevent better risks from subsidizing bad risks."

The impact of bad credit

Recently, insurance.com determined the average home insurance premium for consumers with good credit and poor credit in all 50 states. On average, the insurance comparison website found that homeowners with bad credit can expect to pay 122% more than those with good credit for their home policy. The slideshow above features the ten states with the highest average home insurance rates for consumers with poor credit.  Some states do, however, offer protection to consumers with below-average credit. California and Massachusetts prohibit insurers from using credit history when determining insurance rates, while Maryland forbids the practice just for home insurance. For consumers who find their credit has adversely affected their insurance rates, there are ways they can improve their score and positively impact what they pay.

"People with poor credit can improve their score and shop around for insurance," Kevin Haney, owner of A.S.K. Benefit Solutions, told insurance.com. "They can improve ratings by paying bills on time, reducing debt, and disputing errors on their consumer report. They can get multiple homeowners insurance quotes because each issuing company performs underwriting differently. Getting an insurance quote results in a soft inquiry, which does not hurt your credit score."

Related: 

• New bill aims to ban non-driving factors from insurance rate decisions
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• Best homeowners insurance companies 2019