A voluntary repossession typically stays on a credit report for seven years from the date of the first missed payment. While the negative impact on your credit score, which often drops around 100 points, is most severe in the first 1–2 years, it gradually lessens over time. Recovery involves paying off any remaining deficiency balance and rebuilding credit.
Key Takeaways
A repossession typically remains on your credit report for seven years. It's tough to remove a legitimate repo from your credit report, but you may be able to avoid repossession by negotiating with your creditor before missing a payment.
A voluntary repossession can stay on your credit report for seven years. This is true of both voluntary and involuntary repossession. Both voluntary and involuntary repossession can negatively impact your credit score for up to seven years; however, the impact will lessen over time.
A voluntary repo still shows as a repossession on your credit report for seven years. Your score can drop 100–150 points or more.
A voluntary repossession might be your best option if you can no longer afford your car loan or lease and don't see any other way forward. But there are serious drawbacks to consider, and a voluntary repossession will have a negative effect on your credit score.
You may owe money
After surrendering a vehicle, you could stop financing it but might still owe money to the lender. The new amount due is normally the difference between the outstanding loan balance and what the lender receives from selling the vehicle. This is called the “deficiency.”
The name makes it sound less severe, but a voluntary repossession is essentially the same as an involuntary one as far as your finances go. You'll still have to pay for the costs of the auction. You may still face a deficiency, a collection lawsuit, and wage garnishment.
You may be able to pay to delete a repo. Contact your lender to see if they're willing to negotiate payments on what you owe. If they agree to a pay-to-delete and you pay the agreed amount in full, they'll request that the credit bureau(s) remove the repo from your credit report.
However, the lender has absolutely no obligation to do so. Even though you want to surrender the vehicle the lender won't pick it up.
Gap insurance doesn't cover missed or late payment fees, repossessions, extended warranty costs or car repairs…just loan balances.
Dispute Inaccurate Information
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.
A voluntary repossession stays on your credit report for up to seven years from the date of the first missed payment.
It could save you from paying repossession fees and allow you to negotiate with your lender, but it will still negatively affect your credit. You may also have to pay any remaining loan balance after the car is sold. Voluntary repossession isn't your only option if you're struggling with car payments.
Be sure you completely understand the terms when you make the voluntary surrender. The lender will resell the vehicle, and the proceeds will go toward the balance you still owe on the loan. If there is still a balance remaining after the sale and you don't pay it, it could be turned over to a collection agency.
Repossession Affects Your Credit
It is best for you to proactively address the situation and work with your lender to avoid repossession. But, if you have no other options, remember this is not the end of the world, and there are ways to rebuild your credit.
But there's a subtle difference that future lenders notice. A voluntary surrender shows up as just that—”voluntary surrender.” A repo shows as “repossession.” To a lender looking at your credit report two years from now, voluntary surrender suggests you at least tried to handle your responsibilities.
For most people, increasing a credit score by 100 points in a month isn't going to happen. But if you pay your bills on time, eliminate your consumer debt, don't run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.