A repossession stays on your credit report for seven years, starting from the first missed debt payment that led to the repossession. In the credit world, a repo is considered a derogatory mark. Since credit scores comprise numerous factors, it may be hard to predict exactly how much a repo may affect your credit.
There are many people who have 700 credit scores or higher with previous repo's.
To attempt to remove repossession from your credit report, you need to initiate a credit dispute and prove to the credit bureaus that the repossession is fraudulent, outdated or otherwise inaccurate.
On average, however, many individuals see their score improve anywhere from 75 to 150 points once they no longer have the repossession on their report.
A car repossession can significantly damage your credit score, potentially causing a drop of up to 100 points or more depending on your overall credit history. It remains on your credit report for up to seven years, impacting your ability to secure favorable financing terms in the future.
Once your car is repossessed, you may still have a chance to get it back through a process called redemption. To redeem your car, you typically need to pay the full amount necessary to bring the loan current. This includes not only the missed payments but also any interest, penalties, and fees that have accrued.
Initiate a formal dispute with all necessary credit reporting agencies (CRAs) that issued the report containing the repossession. You can dispute a repossession online with all three credit reporting agencies, and this is the most efficient way to pursue removal: Experian. Equifax.
Another option is to give up the vehicle to the lender voluntarily rather than going through the repossession process. The lender may find this option appealing because it avoids the costs of repossession, and it may agree to reduce or eliminate the deficiency balance on the loan.
On its face, a pay-for-delete letter is simple. These are "written requests sent to creditors or collection agencies to try to remove negative information from a person's credit report, in exchange for payment," says Tiffany Cross, executive vice president of national sales at CredEvolv.
Expect your credit score to drop by at least 100 points after a car repossession. Some lenders specialize in working with individuals with repossessions but be prepared for higher interest rates. Budget carefully after having a car repossessed, and be realistic about what you can afford with your replacement car.
Even if you have collections on your report, you can steadily rebuild your credit by consistently paying all your current bills on time. Payment history makes up a significant portion of your credit score, so making punctual payments will slowly but surely boost your score.
If your vehicle is repossessed due to missed payments, you might be wondering if you can reclaim ownership by filing for bankruptcy. In most cases, the answer is yes — filing for bankruptcy can help you get your vehicle back.
There's nothing stopping you from buying a vehicle with cash immediately after a repossession – but financing can be another story. Within one year after a repo, qualifying for an auto loan can be tough. Here's an option you may have for buying a car right after a repossession.
If your lender can't locate your vehicle to do a "self-help" repossession, they can still sue you for the vehicle. This will involve a small claims case, where the judge will order you to give the car to the lender. You might even be compelled to Court to provide testimony about the location of the vehicle.
Buying a Car After a Repossession Is Possible
Paying cash, saving up a large down payment, choosing an inexpensive used car, getting a cosigner, or using dealer financing can help you get back behind the wheel.
It is possible to continue negotiations with a lender even after the car has been repossessed. Another alternative may involve negotiating over the arrears on your loan with the lender.
Two or three consecutive missed payments can lead to repossession, which damages your credit score. And some lenders have adopted technology to remotely disable cars after even one missed payment. You have options to handle a missed payment, and your lender will likely work with you to find a solution.
So, can you refinance an auto loan after repossession? Yes, refinancing your car loan after repossession is a possible option to explore. If you want to refinance after repossession, it might make sense to refinance with the lender you already have a loan with.
If the repossession is inaccurate, false, or unreportable (because the date falls outside the reporting period), you can dispute and remove it. The credit report attorneys at Consumer Attorneys can help you dispute any and all inaccurate items on your credit report - including a false, old, or inaccurate repossession.
Each can appear on your report as a separate entry. Repossessions, collections, and court judgments can remain on your credit report for up to seven years, reading as a derogatory mark and dropping your credit score by 100 points.
If redeeming isn't possible, you may also have options like:
Negotiate a settlement: If the car gets auctioned but doesn't net enough to cover the loan, you may be able to settle the deficiency balance for a lump sum with the lender.
But, if you have no other options, remember this is not the end of the world, and there are ways to rebuild your credit. If your car is at risk of repossession, it's crucial to explore your options for catching up on your loan. You must not ignore the situation, thinking it might just go away.
While neither scenario is good, in most cases, a charge off is better than a repossession. When a car is repossessed, the lender not only gets to keep the money you've already paid, they take your vehicle and you will still owe the deficiency balance after the vehicle is sold.