Many drivers may be confused about how an auto accident affects their credit scores. The short answer is that it doesn’t, but it’s not always that simple. And there could possibly be other financial consequences that arise as a result of the incident.
When does an auto accident affect your credit?
As previously stated, an auto accident will not show up directly on your credit report. However, there are instances where it will be indirectly affected. Most commonly, your credit takes a hit when you are ordered to pay damages from a resulting lawsuit and fail to do so. That then becomes a financial obligation and can show up as a judgment on your credit report. Imagine applying for a loan at your local car dealership and being denied or racked with a hefty interest rate because of a dip in your credit. These types of things happen all the time when people don’t stay on top of their payments.
Another scenario is if you’re at fault in an accident in which your insurance policy did not cover all the damages and you failed to pay the amount owed. In this case, your file could be sent to a collection agency and placed on your credit report. Both of these scenarios lead to some big drops in your credit score. In fact, a judgment could cause your score to drop 150 points when it’s first reported and it can stay on your credit report for seven years.
One other area in which credit scores often take a hit after an accident is with medical bills. If you were injured in the accident, you will likely have some uncovered medical expenses. Your auto and health carriers will negotiate which expenses to pay between them. Often, there are multiple institutions you will receive bills for and each will have their own way of requesting payment. For example, the ambulance may bill your insurance directly and bill you for the remaining balance, while your surgeon might expect you to file your own claims.
Because of the multiple agencies you are billed from and the various methods they have for filing claims, sometimes bills will go unpaid despite your best efforts. Just like other creditors, medical institutions will eventually report you to debt collectors and the late payments will be reported on your credit.
Protect your assets after an auto accident
The best way to protect your assets and make sure you don’t pay more than you have to is to hire someone to represent you in the matter, especially if you were at fault. Contact an attorney, such as an auto accident lawyer in Mobile, AL as soon as possible following the accident.
Protect your credit after an auto accident
To protect your assets after a car accident, you need to stay informed of anything you might owe, either for medical expenses or property damage. If you were at fault in an accident and you’re sued for damages or injury, you may have to look into liquidating some assets. A common way that people deal with these types of expenses is to get a second mortgage on their homes. You can speak to local mortgage lenders to see if this might be an option for you. Other options might be to sell personal property or land you no longer need.
It’s also important to check your credit often so that you can catch information placed on your report in error or without your knowledge. Errors can be disputed and removed from your credit report when you spot them.