Study highlights the financial disparity between those with poor credit and those with good credit
A new study from InsuranceQuotes.com shows that credit score is having a major impact on the out-of-pockets costs of homeowners insurance in Alabama. Credit is one of the foundational tools that the insurance industry uses to assess risks in any given market. Credit is a gauge of financial risk, allowing the financial service industry to properly assess liability in any given scenario. Poor credit represents a significant risk, which is why those with a low credit score often have trouble finding loans and receiving credit cards.
Homeowners in Alabama with poor credit pay 126% more for their insurance coverage
In Alabama, homeowners with poor credit are paying 126% more for their insurance coverage than those with good credit. Those with a modest credit score are paying 43% more for their homeowners insurance coverage. Credit affects the homeowners insurance sector just as it does any other market, but many people are unaware of what credit is and why it is important in the world of finances.
Credit is not well understood by most people
Many people believe that credit is a gauge of financial ability. Credit cards, for instance, represent a certain degree of financial capability, allowing people to spend money that they do not have based on the premise that they will have it later. Those with good credit have more financial flexibility, while those with poor credit are often considered to be less likely to be responsible with their money, at least from the financial service industry’s perspective.
Those with good credit are often considered more reliable by the financial service industry
On average, homeowners throughout the U.S. with poor credit pay 91% more for their insurance coverage. Those with modest credit pay 29% more for their insurance coverage. Those with excellent credit pay less, on average, for their homeowners insurance. This is because people with good credit are considered to be less of a financial risk, which benefits them in certain ways when dealing with the financial service industry and with insurance companies.