Real Estate News

New study focuses on the impact of credit on buying home insurance

Published: 15 May 2017

The fact that states can have differing title insurance and property laws may seem obvious, but there are other differences that might not be as clear. When the state you're buying property in makes a difference, there's a lot that could influence your ultimate decision, including the strict (or not as strict) relevance of credit scores. A Quadrant Information Services and InsuranceQuotes study looked at the relationship between credit scores, states and the home market.

In general, the source said that credit scores seem to be more important to homeowner insurance premiums, at least compared to recent years. In fact, FICO insurance underwriting expert Lamont Boyd said that the only thing that has "particularly changed" since 2014 is the value actuaries place on credit.

At the same time, higher credit scores clearly impacted home insurance decisions in states throughout the country. Arizona had the highest disparity between fair and excellent credit at 75 percent, while North Carolina had the most negligible difference at .2 percent.

Boyd also referred to the general importance of credit scores for home insurance, suggesting why agents might use this in the first place.

"It's such a powerful tool because it is very, very predictive of future losses," he said. "In other words, lower scoring individuals typically have more insurance losses than those in the higher ranges, which means they are more expensive to insure."

Recent FICO statistics, drawing from the Experian State of Credit 2016 report, looked at the average credit scores in communities around the country as well. This source said that the lowest were found in Shreveport, Louisiana, where the average was 640 and the average amount of debt was more than $41,200. On the opposite end of the spectrum were Mankato and Rochester in Minnesota, both of which had an average score of 708.