Can a Car Accident Affect My Credit Score?

Many Americans understandably worry about their credit score. It affects your mortgage, your car loans, and a variety of other financial aspects of your life. So it makes sense that after a car accident when you’re facing medical bills and auto repairs, you may wonder whether there will be consequences for your credit score.
Fortunately, a car accident itself won’t directly impact your credit score. However, some of the financial impact from the accident could make a difference. Keep reading to learn more about these scenarios and how to navigate them.

How Credit Scores Work

Credit scores are a three-digit number used to predict your creditworthiness, basically how likely you are to repay a loan on time. The higher your score, the better. They are typically between 300 and 850.
Factors that affect credit scores include your payment history on credit cards and loans, your total debt, how long you’ve had your credit accounts open, and how many accounts you’ve opened. Each of these factors is part of your credit report, which is maintained by three major credit bureaus: Equifax, Experian, and TransUnion.
Since car accidents are not directly reported to credit bureaus, they do not play a role in your credit. However, the financial burden after a car accident can impact your score.

Indirect Impacts of Car Accidents on Credit Score

According to a Denver auto accident attorney, the following are some of the most common financial damages from a car accident.

Medical Bills

After a serious car accident, one or multiple parties often sustain injuries. Even when victims can recover compensation through a personal injury claim, it can still be difficult to pay medical bills on time. With the enormous cost of long-term injuries and the possibility of additional unforeseen side effects, many Americans struggle to pay their medical bills after a car accident.
If these bills go unpaid for long enough, they can significantly hurt your credit score. Having a negative payment history plays a major role in determining your score. Late payments are not reported to credit bureaus until they are at least 30 days past due.

Car Repairs

Whether or not a car accident results in injuries, it almost always ends in vehicle damage. Car accident claims can be used to recover compensation from the at-fault party, assuming the accident wasn’t your fault. However, cars lose value after being damaged in an accident, and the difference in compensation would need to be requested through a diminished value claim. There are a variety of circumstances that can make it difficult to recover all of the compensation needed for car repair or replacement.
Using credit cards or loans for car repairs can increase credit utilization, which is the percentage of available credit used. This can directly affect your credit score, especially if you are slow to make payments on the debt.

Lost Wages

Another major expense that occurs after a car accident is the loss of wages that comes from not working. While you physically or mentally recover from your injuries, you will be eligible for short-term (or long-term) disability, which pays a portion of your salary. However, these disability benefits only pay two-thirds (66.6%) of your salary, and some injuries take a long time to recover from.
Because of this, many people fall behind on their bills and end up making late payments. This can negatively impact your credit score because it tells potential lenders that you are not fully reliable when it comes to paying debts.

Protecting Your Credit Score After an Accident

Although some things are out of your hands when navigating the aftermath of an accident, there are a few steps you can take to try and protect your credit.
Try and prioritize your medical bills when deciding how to allocate your money. Explain your situation to your healthcare provider and explore payment options. Medical bills are often a huge expense and not paying them on time is very bad for your credit.
You can also explore payment options for your car repairs. Look into alternative financing options that might be less damaging to credit scores, like personal loans with lower interest rates.
If you are struggling, be sure to communicate with creditors. If you inform lenders about potential delays due to an accident, it will help them understand that you’re working on it and doing the best you can to pay on time.

Credit Score Resources

While car accidents don’t directly affect credit scores, the financial burden can lead to negative impacts. During this time, it’s important to keep a close eye on your credit report and monitor it frequently. If you see any errors related to medical bills or collections, be sure to report them.
There might even be government programs or charities that can help with medical bills or lost wages. Research options and don’t hesitate to seek assistance.
Responsible financial management is important after an accident. Check out some credit score resources to learn more.