How To Remove Repossessions From Credit Report
Repossessions are considered a major derogatory event in terms of credit scoring. They can hurt your credit score and make it difficult to qualify for new financing in the future.;
Yet not all repossessions that show up on credit reports are valid. And even repossessions that did occur may contain credit reporting errors that could damage your credit scores unfairly. If you believe a repossession on your credit report contains inaccurate information, here are some tips that may help you.;
How To Repair Your Credit
The first thing you need to know when trying to improve your credit score is that it will not be easy, and it wont happen overnight. The lender doesnt want to repossess your car; theyd prefer you to make payments, so see if you can create a new payment plan thats more manageable for you not to miss payments. Next, before the repossession happens, try to negotiate a new deal with them.
If the time comes and your car is repossessed, its time to consult an attorney. They will help you through the legal jargon and understand what your options are moving forward.
Finally, its time to hire a professional. Working with a credit repair company has many benefits, and theyll be able to put you on the right track to financial freedom. Make sure you;consider these factors when choosing to work with a credit repair company.
What Is A Repossession
Repossessions occur when the true owner of a piece of property reclaims it from the borrower. This can occur with any borrowed item that still has value even a home. A repossession generally occurs when a borrower has failed to meet the terms of the loan. There are two types of repossessions:
Even though the two repossessions are classified as two separate terms, they can both still affect your credit.
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No Need To Settle Very Old Debt
Regarding settling your debt, unless youre in desperate need of getting that car repossession off your credit report before a years time , and unless youve got thousands of dollars sitting around to pay off that old car debt, I wouldnt bother trying to settle the account.
Its already been on your credit report for nearly six years. I would simply tough it out for the next year or so until it falls off your credit.
What Is An Auto Repossession
When you finance a car, your lender retains a security interest: They hold title to the car until the loan is paid off. Under the terms of your loan contract, your lender can take possession of your car if you fail to make your monthly payments as agreed and default on the loan. Your loan contract spells out exactly when default occurs but, practically speaking, most banks and credit unions won’t start the repossession process until at least 60 days have elapsed since your payment was due.
Different states have different laws regarding repossession. Check with your state attorney general’s office to learn about the laws that apply in your area. Many states require lenders to notify you in advance if your vehicle is about to be repossessed. And many don’t allow lenders to “breach the peace” when taking your vehicle: They can’t damage property or use physical force. You are also entitled to any personal property left in the vehicle.
The lender has a right to keep or sell your car, but typically they’ll sell it and apply the money they get to your outstanding loan balance. If your car does not sell for enough money to cover your debt and the cost of towing, storage and any other fees or expenses that have accrued, you will owe the differenceknown as a deficiency balance.
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How To Avoid Repossession
Even if youve missed payments and been threatened with a repo, you could still avoid this outcome.
But you have to communicate with your lender before youve missed a long string of payments. Lenders dont want to repossess your vehicle. They almost always lose money when they have to cancel a loan and reclaim the car.
Because of this, a lender will usually work with you to avoid repossession. You could refinance the car for lower payments or maybe even skip a payment, with permission, to help you catch up and start making timely payments again.
The key is to get ahead of the curve. Once the banks designee has shown up at your door with plans to drive off in your car, youre almost out of options.
How Long Does A Repossession Stay On Your Credit Report
A repossession, whether voluntary or involuntary, stays on your credit report for 7 years from the date you missed your first car payment. After the 7 year period, the repossession will automatically be removed from your credit report. That said, as a repossession ages, its impact on your credit score will lessen until its ultimately removed from your credit report after 7 years.
If more than 7 years have passed since your repossession, and your repossession hasnt been removed, you can file a dispute with the credit bureau showing the repossession to have it permanently removed from your credit report.
That said, people often mistakenly believe because they engaged in a voluntary repossession that the repossession will not appear on their credit report. But, the reality is that both a voluntary repossession where you willingly surrender your car and an involuntary repossession both have the same impact on your credit and remain on your credit for 7 years.
So, you might be wondering, when does a repossession occur? A repossession occurs whenever a persons stops making timely payments on his or her car loan. If you miss a certain number of payments, and stop communicating with your lender, your lender will likely contact a towing company and ask them to retrieve the vehicle from you. After they take possession of the vehicle, they will likely auction it off to recover some of the money that you owe them.
Ways A Repossession Could Hurt Your Credit
There are several ways a vehiclerepossession can ding your credit.
Keep in mind that each of these derogatory items may represent a separate entry on your credit reports. This means that if the auto lender takes away your car, your credit could suffer several blows from the same incident.
According To Experian A Repossession Can Affect Your Credit History In A Few Different Ways:
- Late car paymentsMissed car payments leading up to the repossession can have a negative impact on your credit. Before repossessing your vehicle, the finance company or auto lender will typically report your initial late car payments that led to the default and repossession.
- DefaultSince a repossession is a sign that you didn’t pay your debt as originally agreed, the finance company or auto lender will report that you defaulted on the car loan, which Experian says can negatively impact your credit score even more than the late car payments.
- CollectionsIf there is still a balance on your auto loan after your vehicle has been repossessed and sold by the finance company or auto lender, they may send that portion of the debt to a collection agency if you are unable to repay it, which can also negatively impact your credit score.
Other Steps To Rebuild Your Credit
Having your car repossessed is definitely a setback, but its by no means the end of the world. Its not even the end of your financial future.
The worst-case scenario is a seven-year period of less-than-perfect credit, and even that can be mitigated with some strategic steps. After you pay off your deficiency balance, try these other steps to raise your credit scores quickly.
How Long Do Collections Stay On Your Credit Report
If a creditors information regarding an accounts delinquency is valid, the collections record will exist for seven years starting on the date it is filed.
Heres how it typically works: When a creditor considers an account neglected, the account may be handed over to an internal collection department. Sometimes, however, the accounts debt is sold to an outside debt collection agency. This often happens when you are about six months behind on payments.
Around 180 days after the original due date of the payment, the creditor might sell the debt to a collections agency, says Sean Fox, president of Freedom Debt Relief. This step indicates that the creditor has decided to give up on getting payment on its own. Selling to the collections agency is a way to minimize the creditors loss.
At that point, you will start to hear from a debt collector, who now has the right to collect the payment. Depending on the type of debt you have, a variety of countermeasures exist on behalf of creditors to prevent major financial losses.
Unsecured debts, like credit card debt and personal loans, are generally sent to a collections agency, or can even be handled internally. If you fail to pay a secured debt, like an auto loan or a mortgage, foreclosure and repossession are the most common approaches for creditors to begin regaining losses.
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Start Building Better Credit Today
If you were asking yourself;how long does a repo stay on your credit, now you know it stays on your report. Remember, if youre working to repair your credit, remember to pay your bills on time and hire a credit repair company you can trust.
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Pay Your Deficiency Balance
Because repos frequently occur when you owe more than the car is worth, borrowers are often left with a deficiency balance. That means even though the vehicle was repossessed, it was sold for less than what you owed on the loan, and unfortunately, you still have to pay the difference.
When repairing your credit after a repossession, make sure you pay back any outstanding loan balance you owe. The delinquent loan will be marked as paid or satisfied on your credit report, which gives your FICO score a boost. Plus, itll lower your overall amounts owed, which also contributes to a better credit score.
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Experian Credit Report Highlights
For all of the accounts listed in your credit file, Experian shows you Status Details indicating when an account is scheduled to fall off your credit report. For example, an auto loan that you paid off and closed in July 2008 will show the following Status Details: This account is scheduled to continue on record until July 2018. Or lets say you had an account go to collections and ultimate get written off by a creditor.
In your case, the negative information is your car repossession. For you and anyone else with these and other negative marks in your credit file, you wont have to wonder how long a certain blemish will haunt you. That critical Status Details section of your Experian report will give you that precise information.
Tips For Repairing Your Credit After A Car Repossession
When you drive those shiny new wheels off the car lot, everything seems great. Then something comes up and you stop making payments. Pretty soon, those missed payments could lead to a car repossession.
A CNNMoney article from March reports that auto repossessions were down to 1.3 million last year compared to 1.9 million in 2009 at the height of the recession. If youre one of those millions of car-owners who lost their vehicle to a repossession, though, it can have serious implications for your credit.
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According to Experian, auto repossessions stay on your credit report for seven years after the original delinquency date. It can negatively impact your credit for the duration of the seven years but that impact lessens over time.
Heres a look at steps you can take to avoid a repossession or bounce back afterwards.
Dispute The Repossession On Your Credit Report
You could also get the negative item removed by disputing the repossession with the three major credit bureaus Experian, TransUnion, and Equifax.
Data from these three bureaus feed your FICO score which lenders check before giving you a loan.
To dispute negative items such as a repossession, youll need to look over the entry closely, searching for any inaccuracies you can find.
Check these details for accuracy:
- All dates
- Account numbers
- Anything else thats inaccurate
If you find an inaccuracy, dispute the entry with the credit bureau thats reporting inaccurate information. The bureau will have 30 days to verify its information is accurate.
If its inaccurate, the bureau will need to either correct the data or remove the entry in accordance with the Fair Credit Reporting Act.
Often, all three credit bureaus will have the same inaccuracy since they receive information from your lender.
Send dispute letters to the bureaus, including your account numbers, name, address, and Social Security number, at these addresses:
- TransUnion Consumer Solutions
- P.O. Box 4500 Allen, TX 75013
It is possible to remove a repossession using this method, but its not a guarantee. If you do find inaccuracies and one of the bureaus doesnt respond to your letters, get in touch with the Federal Trade Commission.
What Happens After A Repossession
Once a car has been repossessed, the lender will send you a letter confirming the repossession and state terms for you to get the vehicle back.; This repossession notice is typically called a Notice of Intent to Sell Property.; In addition to listing charges for a repossession fee and storage, the lender will state an amount that you must pay in order to get the vehicle back.
Sometimes the lender may demand only past due payments.; If they are paid along with any repossession and storage fees, the lender will enable you to reinstate the loan.; Other times, they may demand that you pay the full balance of the loan to get the vehicle back.
You will be given a time period to act before the lender takes steps to sell your vehicle.; The letter will inform you whether the vehicle will be sold at an auction or a private sale, and indicate the date and time of the sale.
Once the vehicle is sold, the lender will send you a second notice called a Deficiency Letter. ;You will be informed of the selling price of the vehicle. ;;Deducting that amount from the total balance owed on the loan, the letter will show a calculation of the total balance owed to satisfy the loan.
Unlike A Flat Tire Patching Up Your Credit After Your Car Has Been Repossessed Requires More Than A Quick Fix
If you miss loan payments that lead you to default on your auto loan, the laws in most states allow your creditor to take the car back at any time. And repossession can linger on your credit reports for years to come.
But thatsnot all. It could also take a toll on your finances.
There are no easy answers if your car has been repossessed. But we can help you better understand what you might face during the repossession process.
What Happens To Your Credit Score After A Repossession
A repossession will have a serious impact on your credit score for as long as it stays on your credit reportusually seven years, starting on the date the loan stopped being paid. But in addition to the repossession being noted, this process often includes the following “dings” to your credit:
- Late payments: For every month you miss a payment, there’s a negative item on your report.
- Defaults: Entering loan default is its own negative event.
- Collections: If you are unable to pay off a deficiency balance, your account may be sent to collections, which will also be noted on your credit report and hurt your credit score.
- Court judgments: Unsuccessful collections may result in a court judgment.
Credit scoring is complex, so it’s impossible to pinpoint exactly how many points your credit score will drop in the event of a repossession. But, given the multiple hits to your credit and the fact that payment history is the single most influential factor in calculating your credit scoreaccounting for 35% of your FICO® Scorethe impact will be substantial. Each of the items listed above stays on your record for seven years, although their impact lessens as time goes by.
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