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Credit Score Crunch: Paying More for Home Insurance

Credit Score Crunch: Paying More for Home Insurance

Homeowners with low credit scores can expect to pay significantly more for home insurance premiums, particularly in states that don't restrict credit-based pricing. Research by Matic shows that in such states, those with scores below 580 pay an average of 35% more than those with scores between 740 and 799. Insurance companies justify higher rates for lower credit scores by citing a higher likelihood of claim filings, a correlation supported by studies like the FTC's 2007 report. Credit-based insurance scores, which differ from traditional credit scores, are used for assessing the risk and setting premiums, and improving them requires similar financial practices to boosting one's credit score. The ethical debate continues over whether this pricing model is fair, as it can disproportionately burden those already in financial hardship.

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