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The relationship between credit and homeowners insurance

While some might not realize it, homeowners insurance and credit can be very interconnected here in the United States.

For one, a person’s credit history could impact what they end up paying for homeowners insurance. This is because credit history is one of the things insurers might look into when determining a person’s homeowners insurance rate.

As a recent InsuranceQuotes study indicates, having a lower credit score could lead to a person facing a significantly higher homeowners insurance rate. The study found that, as compared to individuals with excellent credit scores, individuals with fair scores average 36 percent higher rates and individuals with poor credit scores average 114 percent higher rates here in the United States. The study also found that the rate increases associated with lower credit scores have been going up in recent years.

Now, insurers vary in how much they factor credit history into their rate decisions. Also, there can be a good deal of variation among states on this front. There are a small number of states that completely ban using credit history in the calculation of homeowners insurance rates. And among the remaining states, there is great variation in the average rate increases associated with lower credit scores.

Florida is not among the states that have a total prohibition on insurance companies looking into credit history for determining homeowners insurance rates. However, the good news for Florida homeowners who have encountered credit problems is that Florida has some of the lowest average rate increases in the country in relation to lower credit scores. In the state, fair and poor credit scores are associated with average rate increases of 10 percent and 24 percent, respectively, in comparison to excellent scores.

Homeowners insurance issues also have the potential to impact a person’s credit. For example, whether a homeowners insurance claim a person filed in relation to a property loss they suffered is approved can have significant impacts on them financially. A person’s overall financial situation, in turn, can impact their likelihood of running into debt and credit problems. This underscores how important what steps a homeowner takes in response to a denial of an insurance claim can end up being.

Source: Huffington Post, “Why Poor Credit Can Triple Your Homeowners Insurance,” Laura Adams, May 4, 2017

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