What Affects Your Home Insurance?

Research suggests that about 1 in 20 homeowners will make an insurance claim each year. So while it may seem that your monthly home insurance expenses aren’t worthwhile, the chances of needing your insurance are higher than you might think.

There’s are countless factors that influence your insurance rates, so here are few examples—some you’ve probably considered, and some that might be surprising.

Location: Some areas are simply naturally more prone to damage than others. Potential for weather and natural disaster-related damage will factor into your insurance, as will crime rates and fire protection.

Home value: This may seem like a no-brainer at first glance, but there are some extra considerations. The value of your home and the cost to replace your home from a total loss may not be the same—it can often cost more to rebuild.

Pets: Just like certain HOAs and neighborhoods forbid specific dog breeds, your insurance company may also increase your premiums for a specific breed. Breeds with reputations for being aggressive (fair or not) like pit bulls, German Shepherds, and rottweilers can cost you more.

Trampolines and swimming pools: All that fun comes at a price! Insurance companies see trampolines and pools as big risks for injury and even death, and that’ll affect your insurance rates.

Thinking About Buying Soon? Make Sure Your Credit Is In Order

There’s no more important time to work on your credit score than when you’re about to apply for a mortgage. Improving your credit can save you a ton of money—we’re talking about thousands of dollars over the life of the loan. Here are the actions you can take that will have a notable impact on your score.

Pay Down Your Credit Card Balances

Credit utilization is one of the biggest factors in determining your credit score. Your credit utilization should at least be less than 30 percent of your limit, and it’s even better if you can get it below 15 percent. This rule applies to both individual cards and your overall credit limit.

It may even be worthwhile to use some of the cash funds you were planning to use for a down payment to pay off credit card balances.

Do No Harm

While you certainly want to improve your score if possible, at the very least you’ll want to keep it steady. Avoid opening new lines of credit if you’re applying for a mortgage in the very near future. This will cause a hard inquiry to show up on your credit report.

Take Care Of Negative Items

It’s good practice to check your credit report for negative items a few times a year—you can get one free report from each of the three major bureaus (Experian, Equifax, and TransUnion) per year.

If you find any negative items (collections, late payments, etc.), write a letter to the original creditor. Explain the circumstances that led to the negative item, and request that it be removed from your report. It can be surprisingly effective, and removing a negative item will improve your credit score in a hurry. You can find some good templates for a request letter online.