Impact of Car Accidents on Credit Score
Being concerned about how a car crash might impact your credit score is natural. The attorneys at Salvi, Schostok & Pritchard P.C. understand the overwhelming financial pressure you might be experiencing. Our legal team is prepared to assist you in seeking the compensation you deserve to manage your bills through a personal injury claim or lawsuit. A successful claim can protect your financial health and credit history.
Do not let a collision ruin your financial future. Contact Salvi, Schostok & Pritchard P.C. today for a free consultation with an Chicago car accident lawyer.
Does a Car Accident Affect Your Credit Score?
A car crash can indirectly affect your credit score, particularly if it results in extensive injuries or property damage. The aftermath of a collision can be expensive, and you might need to use your credit card or get a loan to pay your medical bills and replace your car, especially if your injuries prevent you from working. New debt and missed payments can drive down your credit score. You should not experience these financial penalties for a crash someone else caused.
How a Car Crash Can Negatively Impact Your Credit Score
Even if a crash does not directly affect your credit score, it can cause financial difficulties that show up on your credit report. Here are some financial implications that could affect how credit bureaus determine your score:
Expensive Medical Bills
Medical bills can be sky-high after a traffic collision, especially if it results in severe or catastrophic injuries that require long-term treatment. Unpaid medical debt can increase your debt load exponentially, and any missed payments can negatively affect your credit score.
Lost Wages
If a crash leaves you temporarily or permanently out of work, the sudden drop in income can severely disrupt your financial stability. A lack of regular wages can make it challenging to manage essential household expenditures such as mortgage and rent payments, utility bills, child care, and other financial obligations. A solid payment history is a crucial component of credit scoring. If you cannot pay off your debts, your credit score will take a hit.
Car Repair Costs
Auto repairs are not cheap, especially for vehicles damaged in a motor vehicle collision. If your car requires extensive repairs or the insurance company deems it a total loss, you may need to rely on credit to manage these unexpected costs. A higher balance on your credit cards increases your credit utilization ratio — a significant factor in how credit agencies calculate your credit score. Paying off debts can lower your utilization rate, improving your credit score.
Missed Bill Payments
Missed payments on credit obligations are a common issue following a car crash. Many car crash victims struggle to pay their credit card bills, loans, or household bills while out of work. Each missed payment gets reported to credit bureaus, potentially leading to decreased credit scores.
Accounts Sent to Collections
If you miss enough payments on your credit card, the financial institution might send your account to a debt collection agency. Any account sent to collections will be marked on your credit report and remain for up to seven years, damaging your score and diminishing your ability to secure future credit at reasonable rates.
Higher Credit Utilization Rates
A higher credit utilization rate — the percentage of your credit limit you are using — can result from increased reliance on credit cards to manage your finances after a collision. Your utilization rate climbs as you charge more expenses to your credit cards and miss payments on these balances. Credit scoring models view higher utilization rates as indicators of potential credit risk, which can negatively influence your overall credit score.
Increased Car Insurance Premiums
Increased car insurance rates are another common financial repercussion of motor vehicle accidents, particularly for at-fault drivers. Higher insurance premiums add to your monthly financial burden, potentially requiring adjustments in your budget that hurt your ability to pay other bills on time. Such financial pressure can lead to payment delinquencies that lower your credit score.
Other Increased Insurance Policy Rates
Other insurance rate increases, such as for homeowners’ or renters’ insurance policies, might also occur if you make claims related to a collision that damages your property. This rise in your monthly financial commitments can further strain your budget, complicating your ability to meet your financial obligations and negatively impacting your credit score.
Bankruptcy
If the cumulative financial impact of a car crash becomes too overwhelming, you might consider filing for bankruptcy. Bankruptcy could get you out from under unmanageable levels of debt, but it will also remain on your credit report for up to 10 years. This could make it tough to obtain new loans and often results in higher interest rates and reduced credit availability. For this reason, bankruptcy should be a last resort.
How Working with an Experienced Car Crash Lawyer Can Help
An experienced lawyer can help you protect your credit score by managing the financial and legal challenges stemming from the crash. They can determine your options for handling medical expenses. They can also negotiate directly with hospitals and medical providers to lower your medical bills and deal with any liens against you resulting from unpaid debts.
A car crash lawyer can also thoroughly review applicable insurance policies to identify and pursue all the coverage you are entitled to. If you decide to file a car accident lawsuit against the responsible party(s), an attorney can fight for you in court to recover compensation for your medical bills, lost wages, car repairs, and more.
Contact Our Car Crash Attorneys Today for a Free Consultation
Are you facing financial hardships that could hurt your credit score after a car accident in Illinois? Turn to the personal injury lawyers at Salvi, Schostok & Pritchard P.C. for help. Our legal team has successfully recovered over $2.5 billion for injured clients, including 350+ verdicts and settlements exceeding $1 million. Contact us for a free case review to learn how we can demand the compensation you deserve while protecting your credit and financial well-being.
