Does a repossession affect auto insurance rates?

Many people ask, “Will a repossession affect my auto insurance rates?” The short answer to this question is that it will probably raise insurance on a repossessed vehicle.

Your credit impacts your auto insurance rates. That’s because auto insurance underwriters use an insured’s credit score in part to determine financial responsibility. Managing a personal credit file is a necessity.

It’s possible to obtain auto insurance after a car repossession, though it’s likely you’ll pay higher auto insurance rates. That’s why it’s important to compare your existing auto insurance quotes with those of other competitive insurance companies.

Enter your ZIP code to get FREE quotes from multiple auto insurers, even if you have a repo on your record.

How does my FICO score impact my auto insurance rates?

Most bills and outstanding revolving loans that you pay each month report to the three major credit bureaus: Experian, TransUnion, and Equifax. Public information about each person’s financial history is also accessed by the three credit reporting organizations.

How bad does a repo affect my credit? If you’ve suffered an auto repossession, you know it’s devastating personally and financially. Some auto insurance companies won’t even offer an auto insurance quote if you’ve lost a vehicle through repossession.

Insurance companies use your FICO credit score to help determine financial responsibility. A credit file that shows you’re late paying bills and financial obligations is likely to cause the company to approach your application with more caution compared to someone with a higher credit score.

Understanding why a repossession affects auto insurance rates involves studies conducted by insurance companies about consumer financial behavior.

People with a responsible attitude towards financial obligations tend to demonstrate responsibility and care in other parts of life, too. Financial responsibility can reflect responsible homeownership, auto care, and driving.

Insurance companies conclude that a financially responsible person is less likely to be at fault in a car accident.

That’s why insurance companies conclude that a person’s credit history can help to predict their driving record. Drivers with good credit are statistically better risks for the insurance company’s underwriters.

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How does a vehicle repossession raise your auto insurance rates?

Your premium will increase. Not everyone with a low credit score is inherently irresponsible, of course. If you’ve lost a job, suffered through a financially devastating divorce or death of a spouse, or if you’ve been forced to work at a job that pays less than your monthly payments owed, you aren’t purposefully being financially irresponsible.

Unemployment and underemployment statistics show a significant number of Americans aren’t able to earn enough money to pay their bills.

Unfortunately, an insurance company won’t often make a qualitative assessment of your financial responsibility.

An insurance underwriter will quote higher auto insurance rates to insure your vehicle, home, or assets than another person with a better credit score. In their mind, a repossession shows that you’re high-risk for auto insurance.

Some insurance companies know that economic conditions are tough, and they’re willing to offer auto insurance to individuals who’ve experienced a vehicle repossession. However, auto insurance will cost more after a repossession.

After you’ve reacquired the vehicle or obtained a new one, do everything possible to strengthen your credit score.

Seek credit counseling if you’re unemployed or in bad financial straits. Let creditors know you’re doing what’s necessary to rebuild your credit and demonstrate financial responsibility.

Repossession of an auto that you need for daily life and work is a nightmare. Before your car is repoed, do what you can to work out an agreeable payment arrangement with your bank or financing agency.

Most financial institutions understand that economic times are tough for many people, and they’re usually willing to help keep you on the road.

 

What other factors affect my auto insurance rates?

We’ve gone over how repossession affects your credit and insurance rates, but what else ?

In addition to your FICO credit score, insurance companies evaluate your age, driving history, and the vehicle you plan to insure, including how old it is and the make and model.

Some auto makes and models cost less to insure. Insurance companies consult their claims payment records to determine what to charge.

Unfortunately, a good driver with a bad credit history will pay more for auto insurance. A good driver with an auto repossession on their credit file will certainly pay higher auto insurance rates.

How to View Your Credit Report

It’s a good idea to review your credit report prior to purchasing a new or used auto, or prior to applying for auto insurance.

Many credit reports have errors, so it’s wise to let the credit reporting organizations know you contest errors on your credit report.

Obtain a free copy of your credit report from each of the credit reporting agencies each year, or, when unemployed or receiving government financial assistance, obtain your credit report several times per year for free.

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Frequently Asked Questions: Will a repossession affect auto insurance rates?

We know car insurance rates after a repossession can be intimidating, but hopefully, you now know everything you need. Just in case, take a look at the frequently asked questions below for more information.

#1 – Can you make a repossessed auto insurance claim?

If your vehicle is repossessed, you can’t make an insurance claim for it. However, you should keep your auto insurance current on the vehicle until it’s sold at auction if you can’t get it back.

If something happens to the repoed vehicle while it belongs to you, you could be responsible for fixing it, or it could lower the value of the vehicle when it gets sold.

If you don’t keep auto insurance coverage on your existing vehicles, you may have a hard time getting it later. That’s because having an insurance lapse may cause insurance companies to label you a high-risk driver.

This table shows the increase in your rates after a coverage lapse.

Average Auto Insurance Rate Increases After Insurance Coverage Lapse

If at all possible, keep auto insurance coverage to prevent a rate increase in the future.

#2 – How much does a repossession affect your credit score?

How does car repossession affect your credit and how much does a car repo affect credit? A repo can cause a big drop in your credit score. A repossession affects your credit score up to 100 points, and it takes a while to stabilize.

#3 – What do you do after a car repossession?

Life after car repossession may change a little. A car repossession affects your credit a lot, there’s no doubt about that. But what can you do afterward to rebuild?

This video from 850 Club Credit Consultation, LLC goes over some of your options after your car is repossessed.

There are vehicle lenders that are more friendly for those who’ve had a repossessed vehicle in the past.  They often have higher interest rates, but they’re there if you need them. Sometimes, you can get a traditional loan with a co-signer.

And rebuild your credit. Get a credit card and pay it off every month before interest rates hit hard.

Eventually, the repo will fall off of your record.

An auto repossession is a disheartening occurrence. Know that obtaining comparative auto insurance quotes from a variety of insurance companies is your best bet in paying the lowest possible amount for the auto insurance you need.

If you’ve had a reposesssion, don’t let it stop you from getting the best rates. Ready to buy car insurance after a repossession? Start now by entering your ZIP code to get FREE car insurance quotes after a repossession from the best companies out there for auto insurance.

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