How to remove a repossession
This is how to remove repossession from your credit report:
- Negotiate the payment terms with your lender
- File a dispute if there is inaccurate information on your credit report
- Hire a credit repair company to help you in the process
How to remove a repossession from your credit report
In some situations, it is possible to get a repossession removed from your credit report. This is especially true if what is shown on your credit report is inaccurate.
Even if it’s accurate, it still may be possible depending on where you are at in the process.
There are a couple of things you can do to try to remove repossession from your credit report:
- Negotiate with your lender. Contact your lender as soon as possible. Ideally, prior to the repossession occurring. If they have already repossessed your vehicle, still contact your lender as soon as you can. Negotiating the terms with your lender may still be possible. Doing so is beneficial to the lender as ultimately having you pay off your debt is still cheaper and more convenient for them, even if you end up paying less than what you owe. If they do agree to settle the debt and remove it from your credit reports, it is important to get that agreement in writing and to keep that agreement somewhere safe in case you ever need it.
- File a dispute. It’s important to regularly check your credit report and if you notice any inaccurate information including information about a repossession, it should be disputed as soon as possible. To dispute information on your credit report, you need to do so in writing and have supporting documents to back up what you are disputing. You can find additional information and best practices for disputing errors on your credit report by going to the Federal Trade Commission website.
- Hire a credit repair company. For some people, it may make more sense to hire a credit repair company to help you with getting your credit back in order, including (if possible) to remove a repossession from your credit report. Obviously not all credit repair companies are the same and you have to be careful who you hire. We strongly recommend using Credit Saint for your credit repair needs.
How long does a repossession stay on your credit report?
A repossession will stay on your credit report for 7 years. This 7-year window starts on the date of your first missed payment in the stretch of missed payments that causes the repossession to occur as reported to the credit bureaus.
If you are unsure when this date is, make sure to check your credit report to find out.
If you are behind on payments but a repossession hasn’t yet occurred but you simply can’t make the payment any longer, contact your lender and attempt to negotiate the terms of your loan. Doing this is not only in your best interest for obvious reasons but also in the lender’s best interest as it will save them both time and money if you can find a payment that you are able to make.
How bad does a repossession hurt your credit?
It’s pretty much impossible to know an exact amount that your credit score will drop as a result of repossession.
Some sources that we’ve researched indicate this number is somewhere around 100 points but given the complexity of factoring a credit score, that’s simply just a rough estimate.
Since payment history is one of the biggest factors in determining a credit score, suffice to say the hit to your credit score will probably be pretty substantial and will last for as long as it’s on your credit report (although the hit will gradually decrease in time).
Should I pay off a repossession?
In short, yes!
Paying off a repossession can help your credit score for a couple of reasons.
First, it reduces the amount of debt you owe so your debt to income ratio is improved which is one factor they look at when determining your credit score. Second, you may be able to get the repossession removed from your credit report which could, potentially, have an immediate positive impact to your credit score.
In either case, how much this helps improve your overall credit score will be determined by your overall credit history and current credit profile.
Prior to paying off a repossession, it is highly recommended that you contact your lender as you may be able to negotiate the terms with them and pay less than what you owe.
If a lender does agree to have the repossession removed from your credit report or if they agree to altered re-payment terms, make sure you get the agreement in writing prior to making payment and that you keep a copy of the agreement in a safe place in case you ever need it.
If they don’t agree to remove the repossession from your credit report, however, then it will remain on your credit report for 7 years – even if it’s been paid off.
Regardless, it’s still highly recommended to pay off a repossession as soon as you are able to.
Is Voluntary Repossession Better for Your Credit?
In some cases, you may consider allowing your vehicle to be repossessed knowing that you simply can’t afford to make the payments any longer.
Before you consider taking this route, you should contact your lender to see if you can negotiate the payment terms so they are more affordable for you.
However, you may be in a position where you simply can’t keep the vehicle any longer no matter what you do.
Voluntary repossession, however, will negatively impact your credit score just as it would with any other repossession and there is little if any, credit benefit. Just like an involuntary repossession, it will also stay on your credit report for 7 years unless you pay off the debt and the lender agrees to remove it from your credit report.
Can I get a car loan after a repossession?
If you’ve had your vehicle repossessed, you may still be able to get a car loan depending on your current credit rating.
However, if you do find a lender willing to give you a car loan, it is likely that the interest rates are going to be ridiculously high as a result of the repossession making it easy to get caught up in another deal where a second repossession is likely.
You’re better off trying to deal with your repossession first and paying off that debt before trying to get another car loan. For the time being, you may need to just find a cheap vehicle that you can pay cash to buy.