Unless you have recently purchased a home or refinanced the home you’re currently living in, you may not be aware that insurance companies are now looking at credit scores. According to the Insurance Information Institute, insurance companies have learned that a person’s credit history is an accurate predictor of risk. Lenders also look at a person’s credit history, but they do not assess the same factors as insurance companies.
According to Fair, Isaac, and Company, insurance companies assess and weigh these credit factors:
- How much you owe – 30% weighting
- Length of credit history – 15% weighting
- Payment history: e.g. late payments, foreclosures, liens, etc. – 35% weighting
- Types of credit: e.g. retail, credit cards, finance companies, etc. – 10%
- New credit; i.e. how long it’s been since you’ve opened a new account – 10% weighting
If you have a good or great credit score, it is likely that your homeowner’s insurance rate will be lower. If your credit scores are sub-standard, you need to do two things:
- Work on repairing your credit – Consider purchasing the book: Credit Repair by Robin Leonard and Deanne Loonin.
- Shop around for different lenders and different homeowner’s insurance providers.
you can also lower your rate by raising your deductible amount.
If you need to repair your credit, keep in mind that:
- You are not alone.
- You have legal rights.
- You can do it by yourself without paying high fees for an attorney or credit repair company.
- Nobody’s credit is too “poor” to repair.
- The first step is to set a budget and stick to it.
- The second step is to cut up all or most of your credit cards.
Recommendations For Repairing Credit
Do a credit check on yourself once per year to stay on top of your credit scores and take the appropriate steps to improve your credit history and lower your homeowner’s insurance rates. The three major credit bureaus who can provide you with information on your credit history are:
If you would like to find out how much you might save if you moved to a less expensive home, or if you would like a free consultation with a local lender to evaluate whether re-financing is also an option,
please contact me today.
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