WOULD YOU LIKE TO PAY WITH CASH OR CREDIT?
To all of those whom have recently bought a home or if you are planning to in the near future, here’s a reason to maintain a good credit score. Insurance companies may give significant weight to your credit history when setting rates for homeowner coverage.
While insurers’ use of consumer credit in setting rates is nothing new, homeowners may be surprised to know just how much their credit profile can affect their premiums. If you have merely fair credit, you’ll pay about 32 percent more on average for homeowner insurance than those with stellar credit, according to a report from the insurance data firm Quadrant Information Services.
Now if your credit is so bad that you get turned down for magazine subscriptions, the impact is even greater: You’ll pay twice as much on average, in most states, as those with top-tier credit, according to the study, which was commissioned by the rate-shopping site InsuranceQuotes.com. Laura Adams, the site’s senior analyst, said insurers were putting greater emphasis on consumer credit in most states, which makes it increasingly important to pay your bills on time and correct any errors in your credit report.
So what if you haven’t paid your student loans on time. Why does your credit history affect your homeowner premiums? Well like a traditional credit score, which is used to determine whether you’re likely to repay your debts, an insurance score is based on the information in your credit report — but the data may be weighted differently, and it’s used to help predict the likelihood that you’ll file a claim in the future. The lower the score, the higher the risk you’ll file a claim for a loss — and the more you should pay, insurers say.
Some insurers use their own scoring models, while others use outside vendors, and different insurers may place greater emphasis on different aspects of your credit report in computing your score, said Lamont Boyd, insurance industry director for scores and analytics at FICO, which provides insurance-scoring software in addition to traditional credit scores.
The moral of the story is to make wise decisions with all of your purchases on credit and to make timely payments of all loans. One day that dedication will pay off in a big way!