The three credit bureaus — Experian, TransUnion and Equifax — are tasked with maintaining consumer credit histories. When you apply for a loan or credit card, the issuer does a hard inquiry on your credit report to see how risky a borrower you are.
Your payment history on your credit report will detail how timely you are with bills, such as credit card balances and installment loans. But insurance payments are typically not reported to the credit bureaus — for better or for worse.
To put it another way, timely installment loan payments have the potential to help your credit score. On-time insurance payments generally will not help your score because they’re not reported.
And on the flipside, if you’re late paying your homeowners insurance, it generally will not impact your credit negatively. But while you may not see your credit score take a hit following a late homeowners insurance payment, other unfavorable consequences could ensue.
Failing to pay for homeowners insurance could cost you in other ways
In some cases, your homeowners insurance company may decide to turn to a collection agency to get paid on the premium you’re supposed to be covering. And in that situation, if a collection agency reports your debt as delinquent, that information could appear on your credit report and damage your credit score.
Usually, though, when you fail to make your homeowners insurance payment on time, you’ll be given a notice from your insurer asking you to submit that payment within a certain period. If you go beyond that grace period of sorts, your insurer will have the right to cancel your policy. But that alone could hurt you in a couple of ways.
First, if you don’t have homeowners insurance in place, you won’t have protection in the event that your home is damaged. Some types of damage could cost tens of thousands of dollars to address, so letting your homeowners policy lapse really is not a good thing.
Remember, too, that your homeowners insurance gives you liability coverage in the event that someone is hurt on your property. If you don’t have that coverage in place, you risk getting sued personally if someone gets injured in the course of, say, delivering a package to your front door.
Furthermore, if you’re still paying off a mortgage on your home, once your homeowners insurance policy lapses, your lender will receive a notice that you no longer have coverage. At that point, your lender could buy insurance for you and stick you with the bill — a bill that may be considerably higher than the cost of the initial policy you let lapse.
Don’t put your home at risk
Being a little bit late with a homeowners insurance premium payment may not hurt your credit or cause your policy to lapse. Being very late might.
Rather than let that happen, contact your homeowners insurance company if you’re having difficulty paying your premium when it’s due. Your insurer may be willing to work out a payment plan so you don’t fall into the delinquent category and put your coverage at risk.
You can also shop around for different homeowners policies to see if you might reap savings elsewhere. But don’t just blow off a homeowners insurance premium you can’t swing, because doing so could hurt you financially for a really long time.
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