Surprisingly, your credit score IS one factor that can influence the price you pay for homeowners insurance coverage but why and how does it affect your premium? Studies have shown a correlation between credit history and insurance loss potential, indicating that individuals with poor credit tend to file more insurance claims.
In general, people with higher credit scores are seen as demonstrating more responsible financial behaviors, which may translate into more cautious and responsible actions in other areas of life, including homeownership. Insurance companies typically use credit-based insurance scores, not traditional FICO scores. These scores are specifically designed to predict insurance claims and are based on certain credit-related factors. including: - payment history - outstanding debt - length of credit history - types of credit used These scores differ from traditional scores used by lenders in that they do not consider factors like income, employment history, or gender. They also vary insurer to insurer because of differences in how they weight not only the overall score, but each factor determining the score. Having a poor credit score can result in higher homeowners insurance premiums because individuals are considered to be a higher risk. Studies have indicated that the difference in premiums between individuals with excellent credit and those with poor credit can range from 15% to 50% or more. This is ONE MORE REASON why you should work personally with an independent insurance expert who has access to numbers of insurers so you can get the coverage you need at the best price possible. Comments are closed.
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AuthorDennis Lam Archives
September 2023
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