If you had good credit when you last bought or renewed your homeowner's, renter's, or auto insurance, you were given discounted pricing on your premiums.

Conversely, if you had bad credit, you paid a premium on your premiums, or a surcharge — allegedly as much as 80% more!

That surcharge, says Mike Kreidler, the WA State Insurance Commissioner, is discriminatory.

Credit-score-based insurance pricing disproportionately affects people of color and/or those that live in low income areas, Kreidler has said.

And as of June 20, 2021, thanks to an emergency order filed by Kreidler's office on March 22, it no longer exists in WA State.

It is technically a temporary ban of 3 years, but it is anticipated that efforts will be made to make it permanent.

Why you should know about it...

Beginning June 20, if you purchased or renewed a new policy on these included types of insurance, depending on your credit score you are going to see a premium you may not have previously seen.If you have good (or stellar) credit, you might be faced with a premium as much as 80% higher than in the past.Have bad credit? You'll probably see a discount.Many states use credit scores in setting insurance premium pricing. But some states ban the practice, including California, Hawaii, Massachusetts and Michigan. Now, you can include Washington on that list.

There are 250 insurers in WA State that sell these types of insurance. Compliance with this order is 100% mandatory.

Does this affect home-buyers?

Yes. I reached out to 3 local lenders to hear from them what they're seeing, and whether the June 20th change in premiums on new policies has affected any of their current loans.

Heidi Kenerson at People's Bank shared this:

At this time I have not had the shift in insurance cost impact any of my buyers who are under contract with their loan financing, but that’s not to say it will not impact some buyers.

For example, if a buyer were at their maximum debt to income for loan approval, a $21.49 per month change in the monthly insurance cost would drop the loan amount they qualify for by $5000.This would mean to keep their approval they would either have to bring in $5000 more cash at closing, or they have to buy a home $5000 less in price.

Carmen Denson at Umpqua Bank had this to say:

We have been pushing for our borrowers to get premiums in place early- even start the policy before we close just to secure a price point for no last minute surprises.

It seems the lower credit score borrowers might come out ahead, and I hate to make a generalization but those may be the ones that could be closer on the debt to income ratio scale too.

And Baltina Valente and Alycia Hoglin from Guild Mortgage added this:

There have been a few borrowers locally that have been affected with their premiums quoted at $625 and jumping to $815 due to the new ban.

A lot of insurance companies were not able to provide their originally quoted rates from the start of a transaction in Mid May to early June, if the borrower did not “lock” the policy in prior to this new law.

To be clear, although I'm referencing purchases above, this law affects all renewals for existing homeowners and auto owners as well.

We were given a thorough overview on this subject by my local insurance go-to guy, Erik Dyrland.

If you want to learn more or audit your policies, I highly recommend Erik and his team at Farmer's here in Bellingham. I've been with them for a decade or so for all my property and casualty policies, and their service is 5-star.You can find plenty of articles online that go deeper on this topic. Here's one page to get you started:https://www.insurance.wa.gov/credit-scoring-ban