How Car Accidents Affect Credit Scores and What to Do About It

Yes, accidents involving cars do impact your credit score. Credit can follow you for years, making it difficult to get a loan or lease a vehicle. You could find it hard to rent an apartment or even get utilities at home. If you already have a low score, an accident might lower it further.

But if the impact is not that significant and won’t stay long, there are ways to help you recover from the blow sooner than later and avoid further damage to your score. Let us look into how car accidents affect credit and some tips on how to deal with this situation if it happens:

How does a car accident affect your credit?

In a nutshell, a car accident can affect your credit score in three ways: 

• Accuracy: This is a measure of the consistency of your credit report. If you miss a payment on a credit account that is reported in your credit report, this will affect your score. 
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• Repayment history: Your repayment history is a measure of if you are paying your bills on time. If you miss a payment on a credit account that is reported in your credit report, this will affect your score.
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• Utilization: this is a gauge of how much of your credit is being used, which can signify that you are overextending yourself.
  

Why is your credit score important?

Lenders use your credit score, a three-digit figure, to determine whether you should be approved for a loan and at what interest rate. It is determined using data from your credit report. Your credit score will be examined if you want to buy or refinance a car, get a mortgage, or even rent an apartment. Financial organizations are not the only ones that check your credit score.

The same goes for employers, cell phone service providers, insurance firms, energy suppliers, and landlords. The finest rates may be out of your reach if you have a low score. You may be eligible for more fantastic offers, lower interest rates, and more straightforward access to credit if you have a high score.

Tips to repair your credit after an accident

• Know the details of your situation: Before you do anything else, get your credit report. This will give you a detailed report of your credit situation and what caused the damage. It will also show you how you can improve it.
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• Review your credit report: This will give you an idea of what went wrong. You can also use this information to craft a strategy to repair your credit score.
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• Know the time frame: It is hard to estimate the time needed to repair your credit score after an accident, as it will depend on the extent of the damage. However, if you are consistent with your repayment, you should see improvement in 6 months.
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• Utilize your available resources: The first step to repairing your credit score is to tackle what went wrong. This includes paying off any debts that you owe promptly and on time. It also includes disputing any credit report errors negatively affecting your score.
  

What you can do before applying for credit repair

Pay off your debt: It might seem obvious, but paying off your debt as soon as possible can help your credit score. Make sure to pay off your debts reported in your credit report. And make sure your payments are on time.

Invest in yourself: Investing in yourself can also boost your credit score. You can get a loan to expand or start your business.

Use a credit card: Using a credit card wisely can help you build credit. You can also use it to make a small purchase, like gas or groceries, and pay it off immediately.

Conclusion

Regardless of the circumstances, credit repair is a long process. Nevertheless, there are several things you can do to speed up the process. Start by listing your outstanding debts and figuring out a payment plan that works for you. You can also dispute any incorrect information on your credit report. With perseverance, you can get back on track with your credit in no time.