You’re a safe driver. You follow the rules of the road, you yield and drive within the speed limit. Maybe you have even taken a safety course or added some safety features to your car that helped you get a better insurance rate. Then tough financial times hit and your car got repossessed. Your insurance premiums are going to go up even though you may have the perfect driving record.
Insurance companies write policies everyday and base your premiums on one thing; your risk. They use many factors to determine what kind of a risk you are, but it boils down to how risky it is to insure you.
Your age, marital status, length of time as a licensed driver, driving record and where you live are all factors in how risky it is to write you an insurance policy. Now you get a repossession and you just became riskier. And the reason that repossession made you riskier is because it is going to affect your credit rating.
Your credit score is based on many factors itself. Adding a repossession to your credit history decreases your credit score. Your credit score and credit history may seem completely unrelated to your driving, but insurers are looking at how risky you are. If you aren’t taking care of your financial obligations, your credit score suffers and in the long run, so will your insurance premiums along with your chances of landing certain jobs or places to live.
Insurers need to know that you are a good risk for them. They need to know you are responsible and take care of your obligations and your property and that you are diligent about maintaining a good standing with creditors.
Knowing that a repossession will negatively affect your credit score, thus affecting everything else you do in the future; you should do all you can to avoid one before it becomes inevitable.
Do all you can to avoid going into default. Pay your auto loan every month in a timely manner. If you can’t, then you should contact your lender and discuss the options. Avoiding contact with them won’t help you at all. Find out what they can do to help you keep your car.
If you can’t afford to keep the car, you should consider selling it before you get to the point of default. If you can’t sell it, you can check with your lender to see if you can voluntarily forfeit the car. Find out how this will affect you financially, if they will report it on your credit and if you will owe anything afterwords.
Basically, you should take a repossession seriously as it will have lasting effects on your rates.
Bill Savings.com, Can You Ever Recover Financially After Repossession?
Car Insurance Quotes, Car Insurance and Repossession
USA Today, Your Money: Bad Credit Can Inflate Car Insurance Premiums