Credit scoring is an important insurance topic. PIA Western Alliance lobbyists and members have fought several credit scoring battles in many of its nine-represented states and won. Each battle comes along with the realization that many Legislators wanting to limit credit scoring have no idea how it actually helps consumers rather than hurting them.
Credit scoring keeps rates lower for those with good credit and those who work hard to maintain their credit are usually a lower insurance risk anyway.
InsuranceQuotes.com did a study and as an example found credit scoring does — as opponents point out — have a big effect on homeowners insurance premiums. Those with poor credit often see higher rates:
• Home owners with just fair credit will pay — on average — 34% more than those with excellent credit
• That’s up from 32% in 2015 and 29% in 2014
• On average people with poor credit pay as much as 91% more
• That figure can go as high as 114% if the credit is really bad
Credit scoring scores vary from state to state. InsuranceQuotes.com said poor credit in South Dakota gets you a bill — on average — of 288% more. In North Carolina there is negligible difference at an insignificant 0.2%.
And then you have the PIA Western Alliance state of California where credit scoring is outlawed. Massachusetts and Maryland also outlaw credit scoring.
When credit drops from excellent to poor, these states — including three PIA Western Alliance states in bold — see the greatest home insurance premium increases:
1. South Dakota — 288.1%
2. Arizona — 268.6%
3. Oklahoma — 248.0%
4. Nevada — 235.3%
5. Oregon — 234.9%
These states showed the smallest increase:
1. North Carolina — 0.2%
2. Florida — 25.7%
3. New York — 29.3%
4. Wyoming — 43.9%
5. Hawaii — 53.1%
These five states — three of them PIA Western Alliance states in bold — showed the greatest average premium increase for someone with fair credit as opposed to excellent credit:
1. Arizona — 75% increase
2. Oregon — 67% increase
3. Montana — 67% increase
4. Washington, D.C. — 65% increase
5. Oklahoma — 59% increase
InsuranceQuotes.com senior analyst Laura Adams says it is important to also note that different insurance companies use credit scoring differently.
“My advice to consumers is do everything you can to build and maintain excellent credit so you pay less for credit accounts and home and auto insurance. To maintain good credit, make payments on time, keep balances low, and avoid opening many new accounts,” she said.
Different states also have different credit scoring rules for insurers. Some are very strict and others are more lax. It just depends on the state.
Source link: Insurance Journal