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Have bad credit? You might be overpaying for homeowners insurance, study finds

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Consumers with poor credit paid 29% more for their home insurance premiums than consumers with exceptional credit, according to a new report. See how your insurance rates may be impacted by your credit score and how to get home insurance with bad cre (iStock)

Homeowners insurance premiums have risen in the past year due to soaring home values, pricey materials and a labor shortage. But homeowners with bad credit were disproportionately impacted by rising costs, according to a July 2021 report from insurance platform Matic

Consumers with a poor credit score — one that’s below 580 as defined by the FICO model — paid the most for homeowners insurance. They saw an average home insurance premium of $1,412 for the 2020-21 year, which is 29% more than the average premium for a homeowner with an excellent FICO score of 800 or higher, at $1,098.

The average home insurance premium for consumers with poor credit rose faster than it did for those in higher credit bands. Poor-credit homeowners paid 6.4% more for home insurance in the 2020-21 year than they did in 2019-20, compared to a 3.5% increase for consumers with excellent credit. 

  • Poor credit (<580): 6.4%
  • Fair credit (580-669): 5.4%
  • Good credit (670-739): 3.8%
  • Very good credit (740-799): 4.7%
  • Exceptional credit (800+): 3.5%

With rising home insurance rates, it’s more important than ever to shop around with multiple insurers to compare premiums — especially if you have a low credit score. That way, you know you’re getting the lowest premium possible for your financial situation.

You can get free quotes from multiple home insurance companies at once on Credible.

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How to get homeowners insurance with bad credit

Your credit score is based on your credit utilization, how much debt you have and your on-time payment history as reported to the three credit bureaus (Experian, Equifax and Transunion). Having a poor credit history won’t necessarily prevent you from qualifying for homeowners insurance, but it will likely result in higher insurance premiums. That’s because most homeowners insurance companies use your credit score to determine your insurance score, which then impacts your premium.

In most states, an insurance score, which is partially driven by a credit rating, represents the probability of a claim being filed, and affects the premium a homeowner will pay for coverage.

– Statement from Ben Madick, co-founder and CEO of Matic Insurance

In fact, 85% of home insurers use a credit-based insurance score in states where it’s legally allowed, according to the National Association of Insurance Commissioners (NAIC). Some states, including California, Hawaii, Maryland, Michigan and Massachusetts ban or limit insurers from using credit scores when determining home insurance eligibility.

Even if you have a few dings on your credit report, though, certain insurance carriers may weigh your credit history differently than others. Homeowners insurance rates vary between insurance companies, which means it’s important to get an insurance quote from multiple insurers, even if you have a high credit score.

You can shop around for homeowners insurance policies on Credible to make sure you’re getting a fair deal.

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5 other factors that impact your home insurance premium

While your credit score is likely to impact how much you pay for home insurance, it’s not the only factor — and it’s actually not the most important thing that insurers consider when setting premiums. Here are a few other factors that affect the cost of your homeowners insurance policy:

  1. Your coverage amount. The higher your coverage amount, the higher your insurance premiums will be.
  2. Your deductible. A lower deductible amounts to lower home insurance premiums.
  3. The condition of your home. Older homes may have outdated structures that are considered a liability. You’ll get a break on your home insurance premiums if you have safeguards like smoke detectors or a home security system. The type of home you have is also taken into account. Manufactured homes, for example, are built with cheaper materials and will be more expensive to insure.
  4. Where you live. You’ll pay higher insurance premiums if your home is in a zone that’s impacted by natural disasters like floods, hurricanes and tornadoes (although you may have to purchase separate policies to cover these events). Insurance companies will also consider local crime statistics to determine the likelihood of theft or vandalism.
  5. Your previous claims history. If you’ve filed claims in the past, your premiums will likely be more expensive.

But even if you have excellent credit, a newly built home and a limited claims history, you might still expect your home insurance premiums to increase 3-4%, according to Matic. That’s why it’s important to check your coverage and compare homeowners insurance quotes every few years, just to make sure you’re not overpaying.

Take a look over your current home insurance policy, and compare quotes and coverage on Credible’s online financial marketplace

PAYING OFF CREDIT CARD DEBT WITH A PERSONAL LOAN CAN SAVE YOU $700 IN INTEREST

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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