How A Car Accident Can Affect Your Credit Score

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Can a car accident affect your credit score? You might not think that the two are linked, and if you’re thinking only in direct terms, you’d be correct. According to consumer credit reporting agency Experiain, “having an accident will not affect credit scores because your credit report does not include information about car accidents.”

This admittedly straightforward answer, however, doesn’t really delve into all the eventualities that can occur following a car accident, and there are a few possible scenarios that end up impacting your credit score for the negative. Let’s take a look at some of these potential situations and see just how they might end up hurting your credit.

How Car Accidents And Credit Are Linked

First, let’s discuss compensation for car accidents. That Experian quote goes on to say that “the only way the accident could affect your credit report is if you were sued as a result and were ordered by the court to pay damages, or if the insurance companies did not cover all of the costs resulting from the accident, and you had to pay some amount personally but failed to do so.” 

This is the “secret” outcome in which you could see your credit impacted — where you are required to make payments as a result of a car accident, and then neglected to make those payments, in which case the debt you owe would be reported to a credit agency.

And what costs might you incur from a car accident that could wreck your finances, you might wonder? For starters, how about increased car insurance premiums. You might only be partially responsible for an accident, but your insurance company might still view you as an increased risk following an accident, and increase your rates to the point that you have trouble keeping up.

Then there’s the possibility of exorbitant medical bills. Healthcare costs following an auto accident can easily reach thousands of dollars. While insurance might cover these costs, depending on your plan and the specific circumstances, they might not, meaning you’ll have to pay them yourself. The added expense can quickly become too much for some people, and a failure to pay will have deleterious effects on your credit score.

Lastly, there’s the cost from having to repair your vehicle or replace it with a new one. Even with insurance and some money in the bank, this can add up to a tremendous expense, and just as with healthcare costs, it can be enough to cripple your finances and send your credit score plummeting. It’s important to remember how the fallout from an auto accident can impact you and your credit, and to take precautions so that you’re prepared to weather such a storm.