Natural disasters slam Americans with long-term financial impacts

As climate change intensifies, Americans are getting used to seeing the devastation from major hurricanes, floods, fires and "storms-of-the-century." While such events can temporarily hurt the nation's economy, it's easy to overlook the financial havoc -- especially in the long term -- they can wreak on people caught up in any of these catastrophes.

Residents affected by a disaster often see a decline in their credit scores, are more liable to fall behind on their bills and generally experience a cascade of financial consequences, including bankruptcy and homelessness, according to new analysis from the Urban Institute.

"In general, existing disaster relief programs and other forms of assistance, along with private sources of insurance and support, do not fully protect those affected by natural disasters from their financial consequences," the researchers write in the report called "Insult to Injury: Natural Disasters and Residents Financial Health."

People living in an area where the disaster is medium size see the most dire consequences. Researchers defined medium-size as roughly less than $200 million in damage instead of the billions unleashed by massive storms like Hurricanes Sandy or Harvey.

Four years after Hurricane Sandy, for example, storm-hit residents' credit scores dropped an average of 10 points, but those who lived through a lesser disaster had an average drop of 22 points, researchers found. That's partly because the latter group is less likely to get long-term federal and private philanthropic help, according to the study.

Disasters don't damage just personal finances, but they could also widen "already existing inequalities" economically, the analysis suggests. Residents with lower incomes or in communities of color may be hit hardest. People in those communities struck by medium-size disasters saw their credit scores fall 31 points versus a four-point drop in majority-white communities affected by similar events, the researchers found. 

A subpar credit score can prevent you from getting an apartment, bank account or credit card. Those with poor credit before a medium disaster are more likely to lose access to credit completely as the years go on, something researchers initially suspected, lead author Caroline Ratcliffe told CBS MoneyWatch. A similar pattern may apply to auto ownership, the researchers found. 

"What we do see is that it appears that people in this poor-credit group are losing access to credit," Ratcliffe said. "So by year four, they're 9 percentage points less likely to have a credit card."

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