An auto repossession is extremely damaging when listed on your credit report. A repossession is a record of seizure of any asset due to delinquent payment status. If an auto repossession is recorded on your credit report, t it is possible to rebuild your credit and potentially delete the listing from your credit report.
Can an Auto Repossession Be Removed From Your Credit Report?
Car Repossessions can be removed from your credit report in some situations, especially if they have been reported inaccurately. There are several things you can do to try to have a repossession removed:
- Negotiate with your lender: When a lender repossesses a vehicle, they lose money. You paying off your loan is cheaper and more beneficial for them, even if you repay less than what you owe.
- Attempt to renegotiate with them to see if you can resolve your debt and remove it from your credit reports. If the lender agrees to this, make sure to get it in writing. You must follow through with the renegotiated terms you and your lender agreed to.
- File a dispute: When reviewing your credit reports, if you see anything reported inaccurately about your auto repossession, you do have the right to dispute it with the credit bureaus.
The credit bureaus must investigate and ask the creditor to verify your auto repossession information if you do this. If your lender can’t confirm that your debt is valid, fair, or substantiated, then the credit bureaus will delete the auto repossession from your credit reports.
Your chance to renegotiate with your lender may be small or already past if they’ve already repossessed your vehicle. In this situation, filing a dispute is the only option to consider.
How Can I Dispute a Repossession On My Credit Report?
To attempt to remove an automotive repossession on your credit report, you will need to file a credit dispute and demonstrate proof to the credit bureaus that the repossession is inaccurate, outdated, or otherwise fraudulent. Here are several steps you can take:
- Check your credit report and review the information being reported. Every consumer is entitled to one free credit report from each of the three credit reporting agencies every year from Annual Credit Report.
- Make notes of any errors on your credit report. Be sure to include incorrect dates, misreported dollar amounts, and more.
- Gather evidence that substantiates your claims. Evidence includes proof of your identity, the inaccurate account information, and all documentation that prove the reported data is false.
- Report the error to the credit bureaus. They are obligated to investigate the dispute within 30 days and report the results back to you afterward.
- If the lender cannot produce evidence or otherwise verify the information, then the credit bureaus are required by law to remove the repossession from your credit report.
- If the lender can substantiate the account is being accurately reported, it will not be deleted from your credit report.
How Long Do Auto Repossessions Stay on Your Credit Report?
An auto repossession can remain on your credit reports for as long as seven years, making it harder for you to secure other loans and credit cards.
Repossessions have an incredibly negative impact on your credit and demonstrate to lenders that you couldn’t make payments on the property you purchased.
How Do Repossessions Affect My Credit Score?
When you have a repossession reported on your credit reports, you should expect your credit score to drop. The specific point decrease will depend on your credit circumstance. Here are a few ways that auto repossessions affect your credit:
- Late payments: Financed belongings can be repossessed due to several missed payments. The late payments will appear on your credit reports, which has negative implications on your credit score.
- Auto Repossession: Once a vehicle has been repossessed, the lender ordinarily reports that repossession to the credit bureaus, and it will show up on your report for future lenders to see.
- Collections: If you owe money even after the lender has auctioned the vehicle, they may decide to transfer your account to a collection agency. That collections account will most likely appear on your credit reports and decrease your scores.
All of this shows other lenders that you can’t be trusted to repay what you owe, and as a consequence, they’re less likely to approve future credit applications. Aside from losing your assets, a repossession could lead to several adverse items on your credit reports, which will destroy your credit score.
Why Do Repossessions Happen?
Repossessions occur when merchandise or property purchased on credit is behind on payments—usually for three months or more. If a lender thinks the owner ultimately will not get caught up on late payments, they may choose to repossess the property.
Repossessions are most prevalent with car loans, but they can pertain to any loan that involves collateral, like furniture on credit with a furniture store.
Do Voluntary Repossessions Affect My Credit?
A voluntary repossession, frequently referred to as a vehicle surrender, is when consumers can no longer make payments on the collateralized property they bought and voluntarily give it back to the lender. There is a common misunderstanding that a voluntary repossession is better for your credit than a forced repossession.
Whether you voluntarily request your lender to come and pick up their property or you are forcibly repossessed, the understanding is the same: you are unable to make payments on your loan, and the lender is reclaiming the collateral.
One advantage of voluntarily surrendering your property is that the process is less emotionally draining and embarrassing than having a forced repossession, which can happen at any time and any place. Voluntarily repossessing a consumer’s property gives you a bit more control and usually ends up costing less.
Will I Still Owe Money After a Repossession?
A lender can legally sue you for any money or balance still owed on the car, known as a “deficiency balance.”
When a creditor repossesses the collateral, they typically attempt to resell it at auction to recoup their money. For collateral that depreciates over time, like cars, the lender won’t recoup the loan’s full amount because it is almost always worth less than what is owed on the loan contract.
When a lender sells collateral for less than is owed on loan, they will go after the purchaser for the difference.
Can I Get Approved for a Loan After a Repossession?
The short answer is yes; it is possible to get a loan after a repossession still. Nevertheless, very few money lenders are willing and able to take a risk on consumers with poor credit. Those who are eager typically require you to pay higher interest rates and fees.
However, there are lenders out there who approve applications with repossessions on them. You can find someone with good credit to consign the loan for you for better chances of approval and better interest rates.
You can also attempt to improve your credit and payment history.
How Can I Prevent a Car Repossession
Countless people go through financial difficulties at some point in life. If you’re wrestling to stay on top of your car payment, you should mention this to your lender to determine if they can adjust your payment plan.
Regarding auto loans, if you know your financial difficulties will be temporary, you should speak to your lender and ask if they’ll let you skip payments for a month or two. Some auto lenders grant this without penalizing you, but you must openly and truthfully communicate with your lender; otherwise, you will be penalized. Coming to an agreement with your creditor may prevent repossession and allow you to keep the property.
Can I Improve My Credit After an Auto Repossession?
In the future, if you get approved for a loan or a new credit line after experiencing an auto repossession, making on-time payments will help you build your credit back up.
If you dispute an automotive repossession and can’t get it discharged, you will need to wait some time for it to go away. Your credit score will eventually recover, and the repo will fall off your credit report. As you open other credit lines and make on-time payments, you should see your score improve.
CreditStryke can help you through our suite of credit repair services if you’re struggling with a low credit score or other harmful items on your credit reports. For over five years, our team of consumer credit advocates has helped clients challenge inaccurate negative information within their credit reports. Call us today for a free, personalized credit report repair consultation.