Are we really going to lose our credit?
We’ve been dealing with ongoing car issues, and our vehicle has been out of commission for nearly a year now. Fed up with paying $250 a month for a car that we can’t use, we decided to return the plates. Currently, we aren’t using any other vehicle. When we contacted our insurance to cancel, they informed us that if we decide to get a new car, we’ll lose all our credit unless we pay an additional $200 to keep our policy on hold for six months.
Is this accurate? What does it mean for us to start over without credit?
I understand your concerns about losing your credit, especially in relation to your car situation. It’s a bit complex, so let’s break it down.
Insurance and Credit: When you cancel your auto insurance or let it lapse, it doesn’t necessarily mean you’ll lose all your credit. However, if you do not have continuous coverage, it can affect your future insurance premiums and possibly your ability to obtain new insurance. Insurance companies often consider your coverage history when calculating rates, and a lapse may lead to higher costs down the line.
What It Means to Start Without Credit: If you were to lose your credit with an insurance company, it means you may need to start fresh, potentially paying higher rates for a new policy. It doesn’t mean that your overall credit score (like the score used for loans or credit cards) is affected directly. However, a history of insurance lapses can lead to challenges and higher costs for securing a new insurance policy.
Holding Your Insurance: Paying the additional fee to keep your insurance on hold for six months can be a good option if you plan to get another car soon. This way, you maintain continuous coverage and avoid potential increases in your future insurance costs.
In short, while you might not lose all your credit, you could face higher premiums or difficulties in obtaining insurance later. It can be worth it to maintain your insurance coverage if you plan to get another vehicle in the near future. You might want to explore the specifics of your situation further or consult an insurance agent for tailored advice.