How Do You Get a Repossession Off Your Credit Report?

Article Summary:

Car repossession occurs when a borrower stops making loan payments and the lender removes the vehicle from the borrower’s property and possession. A repossession remains on a credit report for seven years and negatively impacts your score. However, it is possible to rebuild your credit score after a repossession.

No one wants a repossession on their credit report. Not only does it impact your credit score, but a repossession also makes you look like a risk to other lenders. This will significantly affect your chances of getting any sort of future loan for several years.

But don’t lose hope! Credit bureaus are known for making more than a few mistakes, and it’s possible that repossession isn’t accurate. Or, even if it is, you can take action to increase your credit score and your chances of receiving better loan terms. But what is a repossession? And how can a repossession be removed from your credit report?

What is a repossession?

A repossession occurs if you repeatedly miss loan payments (in this case, on your auto loan). To make up for funds lost due to the loan, your auto lender reclaims the vehicle, which can then be sold to another borrower.

Repossession can happen in two different ways: voluntarily or involuntarily. In a voluntary repossession, the borrower gives up their car. This may occur if you recognize you can no longer make payments on the vehicle. In an involuntary repossession, your lender removes the car from your property and possession.

Unfortunately, a voluntary repossession still appears on your credit report and negatively impacts your credit score. The repossession process is lengthy and can do a lot of harm to the credit of people who go through it.

How does a car loan work?

If you need to buy a car and don’t have the money to fund the entire purchase, you can take out an auto loan. Essentially, you borrow money from a lender to purchase a car, so the car is not actually yours until you pay off the lender. You are then responsible for making auto loan payments to that lender. If you forget or refuse to make regular payments, the lender repossesses your vehicle. From there, the lender sells the vehicle at an auction to regain the money lost from your loan.

You can choose from a wide variety of lenders and loans, but that can be overwhelming. At SuperMoney, we already did the hard work for you. You can compare multiple car loans using our data to find the right option for you!

What is a credit report, and why is it important?

A credit report contains information about credit activity. This includes loan accounts, credit card accounts, and credit information. A high credit score indicates that you have a history of making prompt loan payments and can therefore be trusted to make payments on another loan. On the other hand, a low score indicates the exact opposite.

Financial institutions and lenders use these reports whenever you want to open a new account. Higher credit scores are more likely to receive loans and earn better interest rates, whereas lower scores may result in a declined application.

What’s the difference between “good” and “bad” credit?

Good or positive credit builds over time as you make consistent and timely payments on your loans. However, bad credit occurs when you miss a loan or monthly payment, which creates a negative mark on your score.

Consumers can get a free credit report to pull their FICO credit score from time to time. This is a good way to ensure that everything is accurate.

Pro Tip

Keep an eye on your credit report and ensure there are no errors. Finding errors in your credit report is much more common than you may think. The Federal Trade Commission (FTC) found that 1 in 5 people have at least one error in their reports. These errors may be the reason you’re denied a loan, so be sure to review your report every now and then.

How does a repossession affect my credit?

Your credit score is comprised of multiple sections, with payment history making up the largest section. Since repossession is the result of a late payment or failure to pay, a repossession has a negative impact on your credit score.

Unfortunately, repossession remains on your credit report for up to seven years. While some actions (like hard and soft inquiries) only slightly affect your score, repossession can make opening credit cards or getting a mortgage difficult.

It’s important to work on credit repair during this time to make a full recovery. It may seem like an impossible task at the time, but it is possible. Over time, new credit accounts will affect your score (ideally in a positive way), and the repossession will have less of an impact.

How FICO calculates credit scores

How much does a repossession damage your credit?

A repossession can impact your score quite a bit. Since a large part of your score is payment history, a repossession indicates your payment history wasn’t great. It will also likely affect your ability to get future loans.

Can the lender sue for the remaining balance?

If there is still a balance remaining on your auto loan, the lender can sue you for that remaining balance. This is called a judgment, which can also reflect poorly on your credit report. The best way to prevent this is by repaying the full balance of your loan and making up for any previously missed payments.

How soon does a repossession show on your credit report?

Once your lender repossesses the vehicle, it takes about 30 to 60 days before the repossession appears on your credit report.

Luckily, you have a few options to remove repossession from your credit report. Try using the steps below to repair your credit!

Is it possible to remove the repossession from my credit report?

The good news? Yes! You can take a couple of different steps depending on whether you believe the repossession listed on your credit report is accurate or inaccurate. If you see a repossession record in your credit history and believe this is an error, there are a few options you have to remove it. Even though removing a vehicle repossession from your credit report may seem complicated, it’s worth every effort in the end.

If the repossession is inaccurate, first dispute the repossession with all three credit bureaus and follow up on your dispute in the coming weeks.

Dispute the repossession with the credit bureau

Because of the Fair Credit Reporting Act, you can make a dispute regarding any error you find on your credit report. Obviously, this is only appropriate when something isn’t accurate. The dispute is then sent to each credit bureau to update its report. The lender then has 30 days to confirm the repossession is valid. If they confirm that the repossession is not valid or don’t respond, then the repossession is removed.

Follow up with the credit bureaus

When you make a dispute against your credit score, the dispute travels through each credit bureau. The three bureaus are TransUnion, Equifax, and Experian. If none of them respond to your letter, then your dispute goes to the FTC. This is why it’s so important to check your credit report regularly. If the information is out-of-date or inaccurate, disputing the repossession claim is one of the best ways to repair your credit.

If the repossession is accurate, consider contacting your lender immediately to develop a payment plan. However, you may want to talk to an attorney before restarting payments on an old debt. In some cases, it may help to hire a credit repair company.

Contact the lender

You can continue to make car payments even after a repossession, which many people don’t realize. Paying off your debt is a great way to repair your credit and prevent your debts from going to a collection agency. However, continuing to make car payments will settle your debt with that lender and thus improve your score.

Hire a credit repair professional

A professional credit repair company specializes in, well, credit repair services. Not only is it possible to remove a repossession from your credit report through this service, but it can also help increase your score.

However, most credit repair companies charge a monthly fee for the service. We recommend reviewing the payment terms to ensure you can afford the company’s work. If you’ve never heard of a credit repair company, you may not know where to start. But we’ve got your back! Check below to find a credit repair company suited to your situation.

How can I improve my credit report after repossession?

If you don’t want to rely on credit repair companies for your improved score, that’s fine. Instead, follow these steps to raise your credit score and put yourself on the path to a great financial future.

Step 1: Pay off any outstanding balance on loans, credit cards, and other debt

Even if your car was repossessed, it’s important to pay off the remaining debt in your name. Sometimes you can do this with one large payment, but other times this is only possible with smaller monthly payments. That’s okay too!

Credit reports without missed payments result in higher credit scores, and a high score makes you look more attractive to future lenders. This allows you to receive better loan terms and lower interest rates.

Step 2: Make sure all your accounts are up-to-date

As we mentioned before, check your credit report to ensure the information is accurate. If something doesn’t look right, call your financial institution or one of the credit bureaus. You can save yourself a lot of stress by disputing a claim on your report.

If you see a repossession on your credit report and it is accurate, begin repairing your credit. Not only do you need to make prompt payments on your accounts, but you also need to continue this pattern for the foreseeable future.

Step 3: Keep up to date with your future payments

A good payment history significantly improves your credit score. By continuing to make timely payments on all of your other accounts, you’ll increase your score and look responsible to other lenders, such as a mortgage lender or credit card issuer.

Most importantly, you can’t let another account default or repeat your repossession. This kind of negative information affects your credit report and score, and you have to work hard to maintain your credit file.

Can I get a car loan after a repossession?

It is possible to get a car loan after a repossession, but it comes at a cost. Because of the prior repossession, you’ll likely have to pay higher interest rates than normal. If you had trouble affording other auto loans, it may be best to wait until the repossession is off your report before applying for another.

Key Takeaways

  • Repossession occurs if you miss multiple payments on your auto loan.
  • Because payment history represents a large section of your credit score, your score will drop after a repossession.
  • If the repossession is inaccurate, you can dispute the claim to remove it from your credit report.
  • On the other hand, if the claim is accurate, you can repair your credit score by making a payment plan with your lender or hiring a credit repair company.
  • Check your credit report regularly through TransUnion, Equifax, and Experian to ensure all information on your report is accurate.

Finding the Right Auto Loan for You

If you recently lost your vehicle due to repossession, don’t let that control your financial future. You may need an auto loan better suited to your needs! While independent research can take hours, SuperMoney has all the resources you need right here. Check out our auto loan and credit repair reviews and comparisons to find the ideal fit for you.

Article Sources
  1. Some Credit Cards Allow Repossession – Even During Bankruptcy — SuperMoney
  2. A Complete Guide To Debt Consolidation — SuperMoney
  3. What Is In Your Credit Score? — SuperMoney
  4. My car has been repossessed, and I was told it will be sold. What can I do? — Consumer Financial Protection Bureau
  5. Vehicle Repossession — Federal Trade Commission
  6. Repossession — Legal Information Institute