Why is your FICO score directly related to your mortgage insurance?
Post date: August 25th, 2011If you have a score that gets you 6.25% 30 year fixed rate. How can the insurance company judge your rate on your credit scores. If you have a low score, you should not get a home loan.
- Tags: credit scores, fixed rate, home loan, insurance, insurance company, score
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August 25th, 2011 at 8:15 pm
I’m guessing you meant the home insurance. It has been proven that people with lower credit scores have a higher rate of claims, which is what the insurance companies care about. Each company has developed an insurance score that they use which is similar to your credit score. These scores may look at different aspects of your credit. As far as I know there haven’t been any studies as to why because the insurance companies don’t care why. Many people have tried to disprove the findings (the University of Texas had a big study several years ago) but so far nobody has been able to.
August 25th, 2011 at 8:15 pm
they will still loan you money if they feel you are not a totally bad risk, but they’ll charge a higher interest rate to offset that risk
August 25th, 2011 at 8:15 pm
I agree, Plus if you are paying the insurance directly with your mortgage and paying one year in full up front, what do they care? I had a client who qualified for a 30yr fixed 5.85% mortgage, but had a hell of a time getting insureance, it makes no sense.
August 25th, 2011 at 8:15 pm
Well, I didn’t know that MORTGAGE insurance, which is a form of LIFE insurance, did credit scoring. But HOMEOWNERS insurance does it, because there is a direct corrolation between lower scores and higher claims paid out.
No one has done a study about WHY people with lower credit scores file more/higher claims, it doesn’t MATTER. The insurance commissioners don’t care why, they just need to see a corrolation.
Just like, no one cares WHY 16 year old boys have more car accidents, just that they do, which is why THEY pay more for car insurance than you do.