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Credit is an important part of everyday life. We use it to secure loans, finance vehicles, and even gain employment. You can't even set up a mobile phone account without having your credit scrutinized. What you may not realize is that your credit score plays a crucial role in determining the price you pay for homeowners insurance.

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Your Credit Score's Affect on Homeowners Insurance Good or bad, your credit matters when it comes to insuring your home. If your credit is poor, you could be paying up to 50% more on your homeowners insurance premium, according to the Insurance Information Institute.

Jeanne M. Salvatore of III explains: "An insurance company uses credit information, together with your driving record and insurance history, to predict whether you are more or less likely to file an auto or homeowners claim." The more likely someone is to file an insurance claim, the higher the risk they pose for insurance companies.

Studies have shown that homeowners with good credit file fewer insurance claims, making them a low-risk for insurers. In contrast, those with poor credit generally file more insurance claims and commit insurance fraud more often (III).

Insurance Scores Insurance companies use "insurance scores" to measure how well individuals manage their overall finances. Insurance scores are determined largely by your credit score and past insurance experience. They are used in conjunction with motor vehicle records, application information, and loss reports to assess your overall insurance risk.

Tips for Maintaining Good Credit

• Keep balances low - Keeping several credit cards at or near the credit limit will hurt your credit score.
• Pay bills on time - Not only do late payments result in extra fees, they are indicative of irresponsible credit management.
• Keep the number of open accounts to a minimum - Having too many credit accounts—bank loans, credit cards, department store charge cards, gas cards, car loans - will hurt your overall credit score even if they aren't used regularly.
• Check your credit for inaccuracies - Consumers are entitled to one free credit report each year from each of the major credit bureaus: Experian, Equifax, and TransUnion.
• Consider credit and money counseling - A qualified professional can work with you to determine the best way to face your financial challenges if your credit is severely compromised.

If you're having trouble finding a homeowners insurance policy that fits your needs, there's no cause for concern. InsWeb.com provides great tools that can help you find an affordable home insurance policy.

— For more ways to save, spend, invest and borrow, visit MainStreet.com.