Poor Credit History Can Affect Homeowner’s Insurance Rates

The increase for having poor credit, 114 percent, is up from 100 percent in 2015 and 91 percent in 2014.

“It’s definitely playing more of a role,” Ms. Adams said.

Quadrant Information Services, an insurance data provider, conducted the analysis for InsuranceQuotes.com. Quadrant calculated rates in each state, using data from six major insurance companies. The averages are based on premiums quoted to a hypothetical 45-year-old who owns an 1,800-square-foot, two-story, single-family home built in 1976. The test policy offered $140,000 in dwelling coverage, $300,000 liability coverage and a $500 deductible. The study analyzed three tiers of credit-based insurance scores: excellent, fair and poor.

An insurance score is similar to a traditional credit score, in that it is based on the information in your credit report. But it is calculated differently, and some insurers use their own proprietary formulas, so your score may vary from company to company.

The spread between premiums for poor and excellent credit varies by state, since state regulators set rules for insurance and some allow credit history to be weighted more heavily than others do, Ms. Adams said. (Other factors in setting homeowner rates, according to the Insurance Information Institute, an industry group, include the age of the home, the condition of its roof, and the quality and proximity of firefighting services.)

The five states with the biggest average premium increases when credit goes from excellent to poor were South Dakota, Arizona, Oklahoma, Nevada and Oregon. The smallest increases were in North Carolina, Florida, New York and Wyoming.

Three states — California, Maryland and Massachusetts — bar the use of insurance credit scores in setting premiums.

Why does your credit file have any impact on your homeowner’s policy?


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