How does a car accident impact my credit report?

Your credit report does not contain accident information. It contains information on how you pay your credit cards, auto and mortgage loans; public record information including civil suits, judgments, bankruptcies, and tax liens; and collection accounts.  There are two companies that compile insurance claims information – Insurance Service Office (ISO) and LexisNexis.  Most insurance companies report their auto claims information to both companies, but LexisNexis is more widely used.

Even though the accident is not on your credit report, your credit can be impacted by the accident depending upon the circumstances. You could be sued by the court to pay damages, the insurance company may not cover all the costs of the accident and you can’t pay the difference.  Any of these can have a major impact on your credit.

Judgment

If there was a civil suit filed and a judgment, this information would appear on your credit report.  Just the existence of the judgment is considered negative, whether it was settled or not doesn’t matter.  It is best to pay the judgment, because unpaid judgments are sent to collection agencies, who report this information on your credit report. The result is a judgment and collection account, which will negatively impact your credit even more.

Unpaid or late paid bills

Another situation is the insurance company did not cover all of the costs of the accident and you made late payments or you were unable to pay the difference. The late payments would be reflected on the account which harms your credit.  If you were unable to pay, the account would be charged-off and turned over to a collection agency.  This information would be reflected on your credit report for both the original account and the collection account.  This is considered negative and will impact your credit.

In most cases, the accident won’t impact your credit report unless there is a judgment, late payments, or collection account.  Negative information on your credit report, can impact your insurance premium since most insurance companies obtain your credit report as part of the underwriting process.  In addition, the insurance claim will be reported to Insurance Service Office and LexisNexis and could also impact your insurance premium.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

 

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