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Why Choosing The Wrong Auto Insurance Company Can Ruin Your Credit

by Amy Walters

Choosing the wrong auto insurance can do more than just put your car at risk. It can also put your good credit at risk if your insurance won’t or cannot cover the damages to your vehicle in the event of an accident or any other event that damages your car.

Damages Can Cost Thousands Of Dollars

Simple damages to the exterior of your car could cost several thousand dollars to repair. A dented quarter panel will generally be replaced instead of fixing the dent. Any problems with your engine can cost as much as $3,000 or more to fix. Replacing your tires or brakes could cost several hundred dollars if components have to be completely replaced.

You Could Be Sued

If you are at fault after an accident, you may be responsible for medical bills and damages done to any other car involved in the accident. Failure to pay these bills could result in your property being repossessed. A judgment against you will most likely be noted on your credit report until that judgment is paid off.

It can Be Difficult To Pay Your Other Bills

Spending thousands of dollars to repair your car or pay for damages to other cars can drain your savings dry. This can lead to falling behind on your payments. Additionally, you may find that you have to use your credit card to pay for things that you would normally pay for with cash. As you fall deeper into credit card debt, you will see your credit score dramatically fall as you use a larger percentage of your credit relative to your available credit.

You May Be Forced Into Bankruptcy

Ultimately, you may be forced to file for bankruptcy because of your mounting bills related to your vehicle. Filing for bankruptcy is a nuclear option that will annihilate your credit and will stay on your credit report for up to a decade. Anyone who needs to use their credit to obtain a loan in the future will no longer have that option. It may then be time to look into a credit repair service provider.

Choosing the wrong auto insurance policy can certainly be damaging to your credit. Failure to have adequate coverage will require you to pay for any damages to your car or other cars on your own. This will lead to using more of your available credit and perhaps filing for bankruptcy.

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