How Long Does a Repo Stay on Your Credit?

Last updated 03/15/2024 by

Summary:

When a lender legally seizes property to repay a debt, this is called repossession. Repossessions most commonly occur when you fall behind on repaying a loan. And, unfortunately, they show up on, and negatively affect, your credit report. In this article, we will explain two types of repossessions, answer the question “how long does a repo stay on your credit,” and look into ways you can minimize the impact of a repossession on your credit report.

Let’s walk through an example. You take out a loan to finance a new car. Your new car serves as collateral for this loan, allowing the bank to take possession of your car if you fail to pay back the loan on time. This ensures that your bank can recover most of its money if you fail to pay them.

In this scenario, for the first few months you make your loan payments on time, but then you lose your job and are unable to make payments. You fall behind on the loan. Since you still owe money on your loan payments, the bank has the right to seize the car because you’ve stop making payments. This is called repossession.

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Voluntary vs. involuntary repossession

All repossessions are a negative mark on your credit report and will take approximately 7 years to come off your report. However, there are both voluntary and involuntary repossessions. If you must have one or the other on your credit report, voluntary repossessions are better.

A voluntary repossession indicates you are working with the lender to repay what you owe. Also, if you give your vehicle (or other collateral property) to the lender before involuntary repossession, they cannot charge you repossession fees. They also cannot force you to pay the balance of your debt remaining after they’ve repossessed and sold the item.

How long does it take for a repossession to come off your credit report?

In most cases, it will take approximately seven years for a repossession to come off your credit report. The seven years begin the day that you make the last payment on the loan balance. The negative mark first shows up on your report 30–60 days after the lender reports the repossession to the credit bureaus.

Credit basics

You’ll better understand the negative effects of repossession if you gain a better understanding of credit basics. Let’s review those now.

What’s on a credit report?

Your credit report includes a history of your borrowing and payment activities maintained by the major credit bureaus (Experian, TransUnion, and Equifax). It includes things like payment history, repossessions, and foreclosures. The following is a list of things you should expect to find on your credit report:

Personal information such as name, address, date of birth, and Social Security number
Public information (repossessions, bankruptcies, judgments, foreclosures)
Secured and unsecured credit accounts with payment history (loans, mortgages, credit cards, etc.)
Collection agency activity
All companies that have previously requested your credit history
Summary of your credit history

What is a credit score?

A credit score is a reflection of your past credit history. It is a number between 350-800, and the higher the score the better you look as a borrower to future lenders. A variety of factors go into your credit score, and every company has a different formula for determining credit score. FICO is the largest credit-scoring company and uses the most well-known formula.

The FICO formula takes into account your payment history, your total debt, the length of your credit history, any new credit your’ve acquired, and the types of credit you have. The most important factor is your payment history, which is 35% of your weighted score. Generally speaking, negative items lower your score and positive items raise your score. Your credit score, although influenced by activities on your credit report, will not be shown on your credit report.

If you want to secure a new line of credit, a lender will look at your credit score to determine whether giving you a loan is safe or risky. You are more likely to be successful in getting credit if you are considered “safe,” meaning you have a higher credit score. A good credit score can also help you secure lower interest rates.

Can a repossession be removed from your credit report?

If the repossession report is accurate, then no, you cannot remove the repossession from your credit report. That is, you cannot remove it on your own, without creditor assistance. But it is possible that there are errors on your credit report. You can and should dispute these when you find them.

Get errors removed from your credit report

To check for errors, consult your annual free credit report. Each of the major credit bureaus (Experian, TransUnion, Equifax) is legally obligated to provide you with a copy of your report once a year, upon request. The easiest way to get your reports is through AnnualCreditReport.com.

You should look through your report for anything that is inaccurate. Look for anything from incorrect payment dates, duplicate entries, transposed numbers, and identity theft. Errors happen, so be thorough in your review! If you identify wrong information and then dispute it, the negative information will be removed from your credit report.

Get an accurate repossession record removed

If there are no errors in your credit report and the repossession record is accurate, you still have options. You have the right to ask for one of two things: goodwill deletion or pay for deletion. If your request for either of these is granted, you should expect to pay a significant portion of the debt immediately. Most lenders will not agree to these deletions without a large sum of money up front.

Goodwill deletion

Goodwill deletion is the best option if the negative mark is the result of circumstances outside your control, like losing your job or suffering a severe illness. If this is your situation, you should write a letter to your creditor asking for the removal of the negative item. Be aware that the probability of this happening increases substantially if you have since paid off your debt or are currently making on-time payments.

Pay for deletion

Pay for deletion is the second option if the negative result is not due to unforeseen circumstances. In this scenario, you have not paid off the debt that you owe, but you offer to pay the debt in full for removal of the negative mark. You can also try and negotiate with the creditor to pay a reduced amount.

How does a repossession affect your credit score?

Given that payment history is the largest component to your credit score, late payments will affect your credit score the most. Because repossessions occur only after several missed payments, they are particularly damaging to your credit score. It is possible that your credit score will go down by 100 points for a repossession alone. This is in addition to the drop in your score caused by the missed payments preceding the repossession.

Credit raters weigh recent credit history more heavily than older credit history, so your most recent history will have the biggest influence on your credit score. So, even if you have a repossession, you should continue to use credit responsibly and pay off loans on time. Over time, the repossession’s effect on your credit score will diminish.

Other things that harm your credit

In addition to repossession, several other negative items can hurt your credit rating.

Late payments

Every missed payment, meaning a payment that’s at least 29 days late, is a negative mark on your credit report. However, the impact on your credit score will depend on your credit profile and exactly how late you are. If you have a history of good credit, a late payment will likely cause a greater drop in your score. If you already have poor credit, individual late payments will have less effect.

Delinquencies

A loan becomes delinquent when a borrower has not made a minimum payment for 30 days or more. Delinquency status remains until a borrower pays the overdue amount plus additional fees resulting from the delinquency, or until the loan goes into default after three to six months of nonpayment. As part of your payment history, delinquencies will affect your credit score, but not nearly to the degree that defaults will.

Defaults

Defaults are when a delinquent account remains unpaid paid for three to six months after first being reported late. At this point, the borrower defaults on the loan. Defaults, as the result of an extended period of nonpayment, will seriously and negatively impact your credit score.

Collections

If you are delinquent for several months, your lender may transfer your account to a collection agency. The lender then writes the debt off its books, but it does not disappear on your end. Now, you owe the collection agency instead of the original lender. The effect on your credit score depends on the size of the debt. If it is a large debt (greater than $100), it will have a larger influence than a small debt.

PRO TIPApproximately 2 million cars are repossessed every year in the United States, and the average debt owed on a car is over $19,000. Repos can happen within 90 days of a loan default. Beat the statistics — stay on top of your loan, and be aware of the consequences for falling behind.

How to rebuild your credit after a repossession

If your credit score is low due to a repossession or other negative mark, you can rebuild your credit. Rebuilding your credit just means that you become a good credit borrower and do everything correctly. Here are some of SmartMoney’s tips:

Make payments on-time. Remember, on-time payments account for 35% of your FICO score, and newer credit history is more heavily weighted than older history.
Check your credit regularly. Make sure you are active on your payments and that your credit report is free of errors.
Pay off debt. Accumulated debt accounts for 30% of your credit score. So, if you pay off debt, you will build your credit.
Do not apply for new credit. When you apply for new credit, a hard inquiry is added to your credit report, which decreases your credit score by a few points. A hard inquiry is when a lender looks at your credit report to evaluate whether to give you a loan.

FAQ

Is it possible to remove repossession from my credit report?

If you’re seeking information on how to remove a repossession from a credit report, it’s crucial to first determine whether the repossession report is accurate. If it is accurate, then no, you cannot remove the repossession from your credit report.

Should I pay off a repossession?

Paying off a repossession may mean that you can remove the repossession from your credit report. However, creditors may not allow you to do this, and you should have a significant amount of money available to repay your debt immediately.

How many points does a repo take off your credit?

The exact amount of points depends on how much debt you have left on your loan and how many payments you missed. Your credit score can drop by 100 points or more.

How can I fix my credit after a repossession?

Continue to build strong credit habits, like making on-time payments and paying off existing debt.

Will a car repo affect my buying a house?

A car repo will affect your line of credit, which means it may be more difficult for you to secure credit for buying a house.

Do you still owe after a repossession?

If you voluntarily surrender the collateral property before your lender seizes it, no. In such a case of voluntary repossession, your debt is settled when you hand over the property. The lender cannot charge you the deficiency balance in this scenario.

Key takeaways

Car loans and other loans secured by collateral allow lenders to seize property for unpaid debts.
If you can’t make the payments on your car loan or other secured loan, surrender the property before it gets seized. Such voluntary repossession will be better for your credit and will fully settle the unpaid debt.
Loan defaults and repossessions have an especially large and negative influence on your credit score. Involuntary repossession has a worse effect than voluntary.
Though loan delinquencies have less of an effect on your credit score than defaults and repossessions, you should avoid them. For one thing, it’s hard to default on a loan you never let go delinquent.
An accurate repossession record will stay on your credit report for around seven years. The only way to have the record removed sooner is to work out an arrangement with your creditor to delete them (goodwill deletion or pay for deletion).

The bottom line

Repossession is not an ideal scenario for anyone. Lenders would rather have the money, and you would rather not have the negative mark on your credit report. If you do experience a repossession, it will hurt your credit history for approximately seven years. You may struggle with securing a new line of credit or you may face higher interest rates in the future.

The best thing you can do for yourself and your future finances is to build back your credit. Pay loans back on time and stay on top of debt and your credit history. Although there are no quick fixes, here are 10 tips from super money on how to boost your credit by 100 points.

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