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By Jay Rezendes | Agent in Rhode Island
  • Improve Your Insurance Score

    Posted Under: Financing in Rhode Island, How To... in Rhode Island, Home Insurance in Rhode Island  |  March 22, 2012 9:28 PM  |  157 views  |  No comments

    Most people expect the cost of homeowners insurance to go up after a claim is filed. But it may surprise you to know that how good you are at managing your finances can have just as big an effect on your premium as the tree that fell on your house.

    Insurers look to your credit history to calculate an insurance score that’s used to judge how much of a financial risk you are. The lower the score, the higher the risk—and the higher the premium you’ll likely pay on your homeowners insurance. Don’t despair. There are strategies, including paying bills on time, that can help improve your insurance score.

    Good credit pays off

    Wondering what too many credit cards has to do with the limb that landed on your roof? More than you’d think, it turns out. Several studies have found that your credit history is a good indicator of how often you’re likely to file an insurance claim. Because more claims translate into more expense for insurance companies, homeowners with low insurances scores tend to be charged higher premiums.

    Insurers claim the use of credit-based insurance scores is fair and actually works in favor of fiscally responsible consumers. A 2006 study found that 53% of Oregon policyholders paid lower premiums on homeowners insurance thanks to credit-based insurance scores. ECONorthwest, the group that conducted the research, estimated the average annual savings for policyholders nationwide at $60.

    How your insurance score is calculated

    Your insurance score starts with your credit report, a history of your credit use. What credit cards and loans do you have? What are the balances? How promptly do you pay? Your report also includes information gleaned from public records such as bankruptcies and liens. FICO is the best-known company that turns the information in credit reports into credit scores. FICO credit scores range from 300 to 850.

    Insurers are less concerned than lenders about your ability to pay back a specific amount than your overall ability to manage money, says Allstate spokesman Adam Shores, especially whether you make late payments and how long since delinquencies took place. Your insurance claims history, as recorded in your CLUE report, also affects your insurance score. So can your age, the construction of your house, and whether you’ve installed smoke detectors and other safety equipment.

    All of these data are crunched to come up with a numerical insurance score. This is where it gets tricky for homeowners. There isn’t a single source for insurance scores, and your insurer probably won’t tell you your score even if you ask. Some insurers employ proprietary formulas. Others use insurance scores calculated by companies like FICO and ChoicePoint, the latter of which will sell you your score for $12.95. ChoicePoint’s Attract insurance scores can range from 200 to 997, with a score over 776 considered good.

    Ways to raise your score

    The most effective way to raise your insurance score is to improve your credit score. You’re entitled to free copies of your credit reports annually from the major credit bureaus: Equifax, Experian, and TransUnion. Order them and look for errors: Is your Social Security number correct? Are all the debts and credit cards yours? Do the balances jibe with your records? Errors can be disputed online.

    If the information on your credit report is correct, there are still things you can do to improve your score. Paring down balances on credit cards is a big plus. Paying bills by the due date is another major factor, accounting for 35% of a FICO credit score. Time is also on your side. Most late payments are removed from your credit report after seven years. A few major problems such as a bankruptcy may stay on for a decade or more.

     Mariwyn Evans has spent 25 years writing about commercial and residential real estate. She’s the author of several books, including Opportunities in Real Estate Careers, as well as too many magazine articles to count.

  • Home is Where the Heart Is—All Around the World

    Posted Under: Home Buying in Rhode Island, Property Q&A in Rhode Island, Home Insurance in Rhode Island  |  March 15, 2012 5:13 PM  |  111 views  |  No comments

    By Steve Brown, First Vice President, National Association of REALTORS®

    I confess. All this time, I thought the passionate dream of owning your own home was somehow uniquely American. After all, this is the dream that has inspired every generation in this country to work hard and save money so as to be able to afford to buy that house, that condo, that farm, to call home. And it is that dream that has inspired REALTORS® to consistently advocate for a financial and tax system that encourages and enables Americans to be able to realize that dream—not to mention protecting the private property rights of those who already do.

    Well, over the past seven days my understanding of the dream of homeownership has broadened. I have discovered it lives in the hearts of people in at least two Asian countries. And I suspect it lives in the hearts of people all over the world.
    I had the opportunity, on behalf of NAR, to meet with local and national real estate professionals as well as senior governmental officials in Taiwan and the Philippines to promote home ownership in America, and the REALTOR® brand. Obviously, given their own histories, political structures and economies, many of their local issues are different from ours. But what was not different was their desire to help their countrymen have a home. And all the benefits of home ownership that we espouse here, they too see as a result of home ownership—better, safer communities, more civic involvement—increased voter participation, better performance in school, long term wealth accumulation, even better, healthier lifestyles.

    And one more thing I witnessed this past week: NAR has a real role to play throughout the world in fostering home ownership. Our business model of an association of REALTORS® working together for the good of not only the consumer, but also of our industry; our model of advocacy work with our governments; our practice of transparency in our businesses; our professional, ethical business practices developed for the past 100 years; our technology that we use to better serve our customer. For all of these reasons and more, our Association needs to be increasingly global. It’s no great stretch to see how much more mobile our world is becoming and what a great pool of buyers are waiting for REALTORS® from America! Moreover, spreading the REALTOR® model, and REALTOR® brand, throughout the world could easily mean doubling our membership in the coming decades.

    My eyes have been opened a little wider these past few days. What I have said so often in the past was underscored: “The work we do as REALTORS® is important.” Now, I would add three more words to that sentence: “The work we do as REALTORS® is important—around the world!”

  • 6 Creative Ways to Afford a Home

    Posted Under: Home Buying in Rhode Island, Home Insurance in Rhode Island, Credit Score in Rhode Island  |  March 8, 2012 4:14 AM  |  111 views  |  No comments
    1. Investigate local, state, and national down payment assistance programs. These programs give qualified applicants loans or grants to cover all or part of your required down payment. National programs include the Nehemiah program, www.getdownpayment.com, and the American Dream Down Payment Fund from the Department of Housing and Urban Development, www.hud.gov.
    2. Explore seller financing. In some cases, sellers may be willing to finance all or part of the purchase price of the home and let you repay them gradually, just as you would do with a mortgage.
    3. Consider a shared-appreciation or shared-equity arrangement. Under this arrangement, your family, friends, or even a third-party may buy a portion of the home and share in any appreciation when the home is sold. The owner/occupant usually pays the mortgage, property taxes, and maintenance costs, but all the investors' names are usually on the mortgage. Companies are available that can help you find such an investor, if your family can’t participate.
    4. Ask your family for help. Perhaps a family member will loan you money for the down payment or act as a co-signer for the mortgage. Lenders often like to have a co-signer if you have little credit history.
    5. Lease with the option to buy. Renting the home for a year or more will give you the chance to save more toward your down payment. And in many cases, owners will apply some of the rental amount toward the purchase price. You usually have to pay a small, nonrefundable option fee to the owner.
    6. Consider a short-term second mortgage. If you can qualify for a short-term second mortgage, this would give you money to make a larger down payment. This may be possible if you’re in good financial standing, with a strong income and little other debt.
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