How to Remove a Repossession from Your Credit Report

Did you hit a rough financial patch and fall behind on your auto loan payments? Depending on the loan agreement and your state of residence, the lender has the right to repossess your vehicle right away. And if they exercised their right to do so, you may be dealing with a low credit score. Or you could be desperately searching for ways to have the repossession removed from your report.

How do repossessions impact your credit score?

For starters, the lender will report the repossession to the three credit bureaus. Once it hits your report, expect your score to drop by at least 100 points. You score willl also drop when the account goes to the collection agency.

How long will a repossession remain on your credit report?

A repossession will remain on your credit report for seven years. However, the impact will start to diminish over time as long as you manage your other credit accounts responsibly. But although your score will start to improve, you may still struggle to qualify for credit and loan products in the future.

Why so? Simply put, a repossession is one of the most severe negative items that you can in your credit report. In turn, lenders automatically assume that your chances of default are significantly higher. And they may offer you debt products with steep interest rates and less favorable terms or reject your applications for credit altogether.

For these reasons, it’s best to work towards removing the repossession from your credit report. You may also want to take specific actions listed later in the article to start rebuilding your credit rating.

Is it possible to remove a repossession from your credit report?

It is possible to remove a repossession from your credit report, but it may take a bit of legwork to get results. And you should also know that whether it was voluntary or involuntary, the impact on your credit is still the same. But for the latter, not all approaches to have it removed could work.

  • Work directly with the lender: if the loan wasn’t reinstated and you still owe the lender, they may remove the repossession from your credit report in exchange for payment. This is known as a pay-for-deletion. You may also have luck with this approach if the loan was reinstated or redeemed, so it doesn’t hurt to reach out to the lender to give it a try.
  • Do-It-Yourself: You can also submit dispute letters to the three credit bureaus asking the lender to verify the repossession. If you don’t receive a response within 30 days, they must remove the negative entry from your credit report.
  • Hire a reputable credit repair company: You can save your time and energy by letting the credit repair professionals do the work for you.

An important note

Even if you’re able to successfully remove the repossession from your credit report, you may still be on the liable to the lender for the outstanding balance or deficiency plus any accompanying fees. This amount is determined by the difference between what you owed and what the lender was able to recoup from the sale of the vehicle.

If the lender decides to sue you in court, your score will incur even more damage as a judgment for the amount owed will be reported on your credit profile.

Will a repossession automatically disqualify you for an auto loan?

Fortunately, a repossession on your credit doesn’t mean that you have no chances of getting an auto loan. The downside is that you may have to deal with subprime lenders to obtain a loan. This means fewer options to choose from, steep interest rates, and less favorable financing terms.

Tips to help rebuild your credit after a repossession

Reinstate or redeem the vehicle

If the repossession is recent, you may be able to reinstate or redeem the vehicle. This could minimize the impact on your credit score. Whether you decide to bring the loan current (and cover all the associated fees of repossession, also known as reinstatement) or purchase the vehicle by paying what’s owed in full (also known as redemption), you won’t have to worry about dealing with collection agencies and having them report the account on your credit report.

Make timely payments

The way in which you handle credit and debt payments have the greatest impact on your credit score, to the tune of 35 percent. For this reason, you want to pay all your bills on time to help give your credit score the best possible chance of recovering from the repossession.

Keep debt balances low

The amounts owed or credit utilization ratio accounts for 3o percent of your credit score. So, try to keep the credit card spending and balances to a minimum.

Apply for a credit-builder loan

Credit-builder loans are another great way to have positive payment history reflected on your credit report. You will make monthly payments until the loan is paid in full, and each payment will be reported to the credit bureaus. The money is also yours to keep once the loan term is complete.

Open a secured credit card

Similar to a credit-builder loan, secured credit cards help boost your credit score by reporting positive payment activity to the credit bureaus. However, you must pay a security deposit equal to the credit limit to open an account. And your funds will be tied up until you close the account or the credit card issuer converts it to an unsecured account.

Comments (0)
Add Comment