If you’re one of the many people who own property in New York, then you have yet another reason to do everything you can in order to maintain and also improve your credit score. That’s because when setting rates for homeowner coverage, a lot of insurance companies in New York look at your credit score first.
This type of practice, though, is not new by any means, but as a homeowner, you may be pleasantly surprised to learn that your credit history can greatly affect your monthly insurance premiums. So if your credit score is not too bad and not that great, you’re going to pay, on average, approximately 32% more for your New York homeowner’s insurance policy compared to people who have an excellent credit history.
On the other hand, if you have poor credit, then you’ll need to pay 200% more for your homeowner insurance policy. Because of that, correcting any errors that may exist in your credit report and paying your bills on time is becoming more and more important for a lot of people.
For New Yorkers, the penalty for having a fair credit history instead of a great credit score was approximately 9%, which is actually the lowest nationwide. But in states where the use of credit files when it comes to setting rates is allowed, the penalties were a lot higher.
But why is your homeowner premium influenced by your credit score in the first place?
If you have a bad credit score, then insurance companies may find that your likelihood of filing a claim in the future to be high, so they’re going to charge you more should you want to buy coverage from them.
“If you have trouble paying your credit card bills, you’re probably less likely to repair your roof or perform routine maintenance on your home. These factors increase the chance of filing a claim on your homeowner’s insurance. Statistically, the lower your credit score is the more likely you are to file a claim. Keep in mind, it works both ways. If you have excellent credit you can expect a very competitive rate.” says David W. Clausen, CEO of Coastal Insurance Solutions in Rocky Point, NY.
Their practice, though, hasn’t gone uncriticized, with many consumer groups objecting to the use of credit scores in setting insurance rates. They claim that insurance companies are trying to make even more money from already financially troubled consumers.
In a 2007 report, the Federal Trade Commission (FTC) found that credit-based insurance scores were a reliable way of predicting the cost and number of car insurance claims consumers will likely file, even though it said there’s no way it can explain the correlation.
While some insurers may consider using outside vendors, others use their own scoring models and there are also insurance companies for which different aspects of your credit report are more important than your actual credit score.
Below you’ll find a few important questions regarding insurance scores:
How can I know if my insurance premium was affected by my credit score?
If you are denied coverage because of your credit score, then the insurance company is going to notify you about it and why they chose to increase your premium. You can also get a free copy of the report that forced the insurer to increase your premium.
Is the C.L.U.E. score the same as the credit-based insurance score?
No, they aren’t. However, they’re both used by insurance companies in order to help them calculate exactly how much you should pay for your New York homeowner’s insurance policy. The C.L.U.E. score is based on a database that’s maintained by the LexisNexis Corporation. Since they track claims with a wide range of popular insurers, there’s a good chance that you may have to pay more towards your monthly premium if they discover you have a history of significant losses.
Can I request a copy of my claims history report?
Anyone is entitled to receiving a free copy of their C.L.U.E. report every year. However, if you purchase property in NY, then you should request the copy of the report from the seller. A high number of claims may signal the property is “high-risk” which will eventually lead to an increase in your monthly premium.