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This Problem Costs Homeowners An Extra 36%

May 4th, 2017 9:30 AM by Jackie A. Graves

Your homeowner's insurance rate can be hurt by a bunch of things — even something as simple as paying your credit card bill late can do serious damage.

That's because underwriters use a credit-based insurance score to set your premium, which looks at things like debt and late payments, among other factors.

"It's not intuitive that how I handle my credit card can affect things like my auto or home insurance," Peter Kochenburger, deputy director of the University of Connecticut's Insurance Law Center, told CNBC.

A study from found that having a credit score in the middle of the pack can result in rates that are an average 36 percent higher than the amount people with excellent scores pay.

It's even more dramatic when you look at the difference between those with poor versus excellent credit — premiums can be a whopping 114 percent higher on average.

The impact of credit scores on your homeowner's insurance rate also differs from state to state. (see charts).

Experts say this is another reason why it's smart to shop around for homeowners insurance.

Robert Hunter, director of insurance at the Consumer Federation of America, said it's a good idea to do some homework when looking for coverage.

"Insurers don't always use the same methodology in utilizing credit scores, and it pays to shop around, ask an insurance agent, or also talk to your state insurance department about the use of credit scores," Kochenburger said.

Purchasing your home and auto insurance from the same insurer may help get you a 5 percent to 15 percent discount on your premium, said Loretta Worters, vice president of media relations at the Insurance Information Institute.

"To protect your credit, pay bills on time, don't obtain more credit than you need and keep your credit balances as low as possible," she said.

Worters noted that if you live in an area that has a lot of crime, improving your home security could help your rates — though not all systems are eligible for a discount and many are expensive, so double check if it qualifies before you invest.

"Credit reports can have errors, and correcting those is often the "quickest and most straightforward thing you can do," Kochenburger said.

By Natalia Wojcik - To view the original article click here

Posted by Jackie A. Graves on May 4th, 2017 9:30 AM


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