{"id":6646,"date":"2025-07-14T08:52:32","date_gmt":"2025-07-14T12:52:32","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=6646"},"modified":"2025-07-14T08:52:33","modified_gmt":"2025-07-14T12:52:33","slug":"could-climate-change-your-credit-score","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/could-climate-change-your-credit-score\/","title":{"rendered":"Could Climate Change\u2026 Your Credit Score?"},"content":{"rendered":"\n
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Since the 1980s, climate-related disasters have gradually ticked up. And the annual dollar cost of disaster losses and recovery has risen 1,580%. This statistic comes from First Street, a firm known for its analyses of climate risks to real estate.<\/p>\n\n\n\n

The firm researches the costs of wildfires, storm winds, and water infiltration. In a year with especially severe weather, close to 7% of foreclosure loan losses are likely climate-related.<\/p>\n\n\n\n

In a decade, says First Street, climate effects could amount to nearly a third of all mortgage default losses. Wow.<\/p>\n\n\n\n\n\n\n\n

Watch for Lenders to Begin Accounting for the Borrower\u2019s Climate Risk<\/h2>\n\n\n\n

Credit scorers may start acting on the above facts and projections now, to spare the industry from a growing risk factor. In severe weather years, the lenders of today face somewhere around $1.2 billion in mortgage-related credit losses. And the total, says First Street, could rise to $5.4 billion annually a decade from now. It could, that is, unless companies modify their lending standards.<\/p>\n\n\n\n

So, what will this mean for mortgage borrowers?<\/p>\n\n\n\n

It means lenders will start looking at our purchases in new ways. Within the rapid rise in climate-related events, lenders are watching the risks to our homes \u2014 which, to them, represent loan collateral. If banks trying to assess our credit risk start including climate-related information to protect themselves, then our credit scores could reflect what\u2019s happening in our environment.<\/p>\n\n\n\n

How we\u2019re perceived by lenders is essential knowledge for borrowers. Whenever our credit scores take a hit, loans become harder to get, and more expensive when we get them.<\/p>\n\n\n\n

Keeping our scores up has always meant using our credit cards and loan products faithfully. But now, it could also involve where <\/em>we choose to buy, and what we do to address the risks<\/em> where we buy.<\/p>\n\n\n\n

As explained by Matthew Eby, First Street CEO, today\u2019s loan applicant doesn\u2019t just present a set of financial risks to the lender. Now, the homes we buy have their own set of risks. This complicates the question of creditworthiness.<\/p>\n\n\n\n

Location, Location, Location: A Classic Phrase Takes on New Meaning<\/h2>\n\n\n\n

Deed holders in places where disasters are getting more common (and more expensive) are already coping with rising insurance rates \u2014 if they are able to get the companies to keep issuing policies at all in these areas.<\/p>\n\n\n\n

And as premiums go up to cover the insurers\u2019 positions, homeowners shoulder more of the costs. This is a pain for homeowners everywhere \u2014 but especially in hard-hit areas.  <\/p>\n\n\n\n

When the price of an insurance policy goes up 1%, First Street finds, defaults leading to foreclosure also <\/em>increase by about 1%.<\/p>\n\n\n\n

In short, homeowners stressed out with rising insurance bills may be at risk of going into default. Lenders at that point have to mitigate their losses, so there are ripples throughout the whole real estate financing world.<\/p>\n\n\n\n

Even so-called climate havens are dealing with hurricanes and floods these days. See more on <\/strong><\/em>The Resilient Deed: What Property Buyers Should Know About Climate, Weather, and Insurance<\/em><\/strong><\/a>.<\/strong><\/em><\/p>\n\n\n\n

Renovations after wildfire or wind damage are normally covered by the homeowner\u2019s insurance policy our lenders make us pay. But of all types of damage across the country, floods are racking up the highest costs. Add to this the rising burden on homeowners as local governments address stormwater runoff<\/a>.<\/p>\n\n\n\n

Drawing on information from the National Oceanic and Atmospheric Administration (NOAA), First Street looked at the risk involved with homes near the coasts. The report found:<\/p>\n\n\n\n