Utahns with low credit take a bath on home insurance
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Utahns with low credit scores can expect to pay nearly $1,500 more annually on average for home insurance compared to those with high scores, a new analysis finds.
Why it matters: Credit scores aren't necessarily indicative of somebody's ability to pay their bills — and tying them to insurance prices can disadvantage low-income and minority homeowners, among others.
Driving the news: U.S. homeowners with low credit are charged $1,996 more annually compared to otherwise identical homeowners with high credit, per a new report from the Consumer Federation of America and the Climate and Community Institute.
- That's based on over 600,000 nationwide "test quotes" representing "what a typical, hypothetical homeowner would be charged for homeowners' insurance."
- The researchers controlled for variables other than credit score. They defined a "low" score as about 630 on the 300-850 FICO range, and a "high" score as about 820.
Zoom in: By percentage, Utah has one of the largest "credit penalties," with low-credit policyholders paying 125% more than those with high credit. That's tied for the 7th largest penalty of all 50 states.
Yes, but: Utah's average insurance rates are on the low side, so in raw dollars, Utah's nearly $1,500 credit penalty is in the bottom half of all states.
- The biggest average penalty is in Oklahoma — more than $4,000.
- Nationally, the average is about $2,000.
Zoom out: Three states — California, Maryland, and Massachusetts — block insurers from using credit scores in pricing home coverage.
Between the lines: Low-income people and people of color tend to have lower credit scores.
- And young people just starting out in life need time to build up their credit history.