Does a Car Accident Affect Your Credit Score?

Does a Car Accident Affect Your Credit Score?

by | Nov 6, 2023

Car accidents can have a substantial impact on various aspects of life. One of those consequences is the potential for your credit score to be affected.

Accidents can cause not only physical and emotional repercussions, but financial implications as well. Car repairs, medical bills, and other costs can have a detrimental impact on one’s well-being. These unexpected expenses can strain your budget – leading to missed payments, collection accounts, or even bankruptcy. These circumstances can negatively affect your credit score. In this article, we discuss how car accidents can influence your credit score and provide some tips on mitigating these effects.

What Are Credit Scores

A credit score is a numerical representation of your creditworthiness, and it’s a critical factor in your ability to obtain loans, credit cards, and other financial opportunities. This score is influenced by various factors, including your payment history, debt utilization, length of credit history, and more.

How Car Accidents Impact Your Credit Scores

While car accidents may impact your insurance premiums, they do not directly affect your credit score. However, car accidents that bring on unexpected and unpaid bills present a high chance of affecting your credit score. Circumstances such as missed payments, collection accounts, bankruptcy, insurance premiums, credit utilization, and inquiries all play a significant role in your credit score.

Missed Payments

If the car accident results in significant repairs or medical bills that you cannot immediately cover, you may miss payments on your existing financial obligations, such as credit card bills, loans, or other debts. Late or missed payments can have a negative impact on your credit score.

Collection Accounts

If you are unable to pay your medical bills or repair costs, the service providers or collection agencies may report these unpaid debts to the credit bureaus. These collection accounts can significantly lower your credit score.


In extreme cases, accidents may lead to overwhelming debt. This could lead to the decision to file for bankruptcy. This can be a severe hit to your credit score and remain on your credit report for up to 10 years.

Insurance Premiums

After an accident, your auto insurance premiums may increase, which can strain your finances further. If you struggle to pay these higher premiums, it could lead to missed payments and a negative impact on your credit.

Credit Utilization

If you need to rely on credit cards to cover unexpected expenses, it can increase your credit card balances and impact your credit utilization rate. High credit utilization can negatively affect your credit score.

Direct Impact of Car Accidents on Credit Scores

The good news is that a car accident itself does not have a direct impact on your credit score. Your score is primarily influenced by financial activities, such as making timely payments on loans and credit cards, and not by your driving history. However, factors such as risk assessment depending on state regulations may cause your insurance rate to be affected.

Risk Assessment

In some states, insurance companies can use your credit score as one of many factors to assess the level of risk you pose as a policyholder. Low credit scores may cause insurers to perceive you as a high-risk customer and charge you higher premiums.

State Regulations

The use of credit scores in insurance pricing is regulated by the state. Some states place constraints on the extent to which insurers can include a policyholder’s credit in their evaluations. It would be beneficial to look into which states have banned this practice to see how you are affected.

Indirect Impact of Car Accidents on Credit Scores

While a car accident doesn’t directly affect your credit score, there are indirect ways in which it can impact your financial well-being and potentially affect your credit:

Medical Bills and Collections

It is extremely important to get evaluated by a medical professional after an accident if you believe you may have sustained an injury. However, you may face copays and unexpected expenses from the hospital or medical offices. While bills can become overwhelming and challenging, it is important to create a payment plan and pay on time. Unpaid bills that go to collections can negatively affect your credit.

Missed Payments

The financial strain of dealing with accident-related expenses might lead to missed payments on other financial obligations, such as credit cards or loans, which can harm your credit score.

Steps to Help Protect Credit Scores After Car Accident

Protecting your credit score after a car accident is crucial to ensure your financial stability and future creditworthiness. Here are a few steps to protect your credit:

1. Contact your insurer immediately

Report the accident to your auto insurance company as soon as possible. This can help expedite claims and reduce the risk of unpaid bills.

2. Review your policy

It is beneficial to be fully educated on your insurance policy and what is/is not covered.

3. Manage Bills

Whether you have insurance or not, you will need to develop a payment plan to manage all bills that may be addressed to you.

4. Monitor Credit with MyScoreIQ

Regularly review your credit report with MyScoreIQ credit monitoring services to check for inaccuracies. Investing in MyScoreIQ services helps protect your finances and personal information. Possible suspicious activity is reported to you in real time. And MyScoreIQ 100% U.S.-based experts are here to assist you if your information is compromised.

5. Communicate with Creditors and Insurers

If you are facing financial difficulties due to an accident, don’t hesitate to communicate with your creditors and insurers to explore options like deferment or revised payment plans.

6. Consider Financial Counseling

If your accident-related expenses are overwhelming, seeking assistance from a financial counselor can help you regain control of your finances.

Bottom Line

While a car accident cannot directly affect your credit score, there are many factors surrounding a car accident that can play a detrimental role. The unforeseen expenses that often accompany such incidents can lead to missed payments, collections accounts, or even bankruptcy – all of which may affect your creditworthiness.

Take proactive steps to manage the financial aftermath of a car accident and invest in a MyScoreIQ credit monitoring plan as an investment toward your future.

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*Source: Fair Isaac Corporation.

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