Unfortunately for those with a poor credit history, securing a mortgage isn’t the only problem they face when trying to get onto the property ladder. Poor finances can also have a considerable impact on one’s home insurance premiums too, according to a new study commissioned by the InsuranceQuotes.com website.
The study looked at the kind of impact that a credit-based insurance score has on home insurance premiums, and found that those who have a median credit-based insurance score would pay 32 percent more than someone with a stellar credit record, on average.
Even worse – those who’s credit score is deemed to be “poor” could find themselves paying up to 100 percent more for home insurance, the study found.
InsuranceQuotes.com notes that a credit-based insurance score is different from a regular credit score, being comprised of several factors from that check. This includes the length of a person’s credit history, late payments, collections, and new applications for credit. The score assigned is to help insurers assess the likelihood an owner will file a future claim.
“It has been proven statistically time and time again that the way someone manages his or her credit correlates very strongly to whether or not they will have a future home owner loss,” says Lamont Boyd, insurance underwriting expert at FICO. “Not that every insurer uses this data the same way. They all have their unique models. But the underlying principle is the same across the board.”
Jim Lynch, chief actuary with the Insurance Information Institute, says that the higher a home owner’s credit score, the less likely that person is to incur claims. However, those with worse credit scores have been found to be more likely to file a claim in the future, Lynch says.
About 90 percent of home insurers use credit-based insurance scores in states where it’s permitted. However, the states California, Maryland, and Massachusetts do not allow the use of credit in setting home insurance rates.
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