(3 Ways) To Remove A Repossession From Your Credit Report

(3 Ways) To Remove A Repossession From Your Credit Report

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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. 

What Is a Repossession? 

When you fall behind on your auto loan payments, the lender may take back your vehicle to try to recuperate its loss. This process is known as a repossession. 

There are two primary types of repossessions — voluntary and involuntary. 

  • voluntary repossession, or voluntary surrender, happens when you proactively turn over the vehicle you financed to the lender.
  • An involuntary repossession occurs when a repossession company comes out to seize your vehicle on the lender’s behalf.  

From a credit standpoint, there’s little difference between a voluntary and an involuntary repossession. Either type of repo could potentially have a severe impact on your credit score. 

However, with some lenders, a voluntary repossession might work in your favor. When (and if) you want to borrow money from the same lender again in the future, it might be more willing to take another chance on you if you willingly cooperated prior to your repossession. 

If you can qualify for a new loan from the same lender  — and there’s no guarantee of that happening — expect the rate and terms to be less favorable due to your higher credit risk.

3 ways to remove a repossession

Here are three different options you can try to get that repossession taken off your credit report:

1. Negotiate your payment terms with the lender

If they’re feeling generous, the lender can allow you to negotiate the terms anew so that you can continue with your payments. 

You will have to convince them to allow you to retain the car and maybe reduce the monthly payments so that you pay for an extended time. 

If they want your business enough and feel like giving you a second chance, they can contact the credit bureaus and remove the repossession item from your report. 

Just be sure to get any guarantees in writing, so you can dispute the entry if you find it hanging around your report later on.

Here’s a good guide on how to negotiate a term loan in more specific detail.

2. File a dispute to remove it

If you believe the repossession on your credit report is inaccurate or incorrect information, you can file a dispute with the credit bureaus to remove the item. This involves writing a letter and mailing it to the bureaus via certified mail.

If the lender cannot prove that the information is valid or fails to respond within 30 days, the item be removed from the credit report.

We have an entire guide that walks you through how to dispute an error on your credit report. 

3. Hire a credit repair company to do it for you

If you don’t feel like negotiating with lenders or filing paperwork with the credit bureaus, you can hire a credit repair company to do all the work for you.

We recommend going with Credit Saint.

They’ll likely end up following many of the same steps and using the same techniques, but they do have the experience and resources that you likely don’t have, which may work to your advantage.

Just know that there’s no guarantee they’ll be able to get the repossession information removed from your credit report, and that it will cost you a fee, around $69-$99 per month.

What Does the Repossession Process Look Like? 

When you default on an auto loan, your lender may be able to take the vehicle back without warning depending on where you live. In some states, one missed payment may be enough to put you in jeopardy of losing your car. 

Every state has different laws, but here are the basic steps of the repossession process. 

  1. You default on your loan, according to the terms of the contract. 
  2. The creditor takes possession of your car, through voluntary or involuntary means. 
  3. The creditor typically reports the repossession to the credit bureaus the next time it sends in monthly account updates. 
  4. The credit bureaus add a notation to your credit reports such as “repossession,” “voluntary repossession,” or “involuntary repossession.”
  5. Your vehicle is sold, often at auction. Depending on your state of residence, you may have the opportunity to redeem your vehicle before this point (aka, pay the creditor what you owe, including repossession fees.) 
  6. The lender applies the proceeds from the sale, minus fees, to your outstanding balance. 
  7. Any deficiency balance — the loan amount not covered by the sale of the car — may remain on your credit report. 
  8. The creditor may opt to sue you for the deficiency balance, as long as your state’s statute of limitations hasn’t run out. 

How to spot a repossession on your credit report

Repossessions are typically listed under the public records section of your credit report. 

For example, on the Experian credit report, they give you a snapshot of your record right at the top—in this example, you can see there are zero public records, but if you have a repossession, the information would likely appear here:

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

If you don’t do anything about it and just leave it, a repossession will stay on your credit report for seven years.

Obviously, this is a situation you want to avoid because having a repossession on your credit report that long will impact your credit score the entire time. That’s why we recommend trying one (or all three) of the options we mentioned earlier. 

How Long Do Repossessions Stay on My Credit Report? 

The Fair Credit Reporting Act (FCRA) sets limits on how long most negative information can stay on your credit report. Repossessions can remain on your report for seven years from the date they became 180 days past-due. 

How Do Repossessions Affect My Credit Score? 

Credit scoring models treat repossessions as a major derogatory event. But it’s nearly impossible to predict exactly how much a repossession might affect your credit score. 

Everyone’s credit report is different. The credit score impact that a repossession has on a credit report with severe damage is going to be different than its impact on an otherwise clean report. In the first example (the damaged credit report), adding a repossession will likely have some adverse credit scoring consequences. Yet in the second example (the otherwise clean credit report), a notation of repossession could have a severe credit score impact. 

Either way, adding a repossession onto a credit report will hurt, not help you. It can lower your credit score — perhaps to a significant extent — and make it hard to qualify for new accounts. 

According to Experian, an involuntary repossession might hurt your credit score a little more than an involuntary one. Yet both types of repossessions can be extremely negative from a credit scoring standpoint. 

Can I Get a Loan After a Repossession? 

Qualifying for a new loan or credit card after a repossession can be difficult, but not impossible. If you find a lender that’s willing to do business with you, you should expect to pay higher interest rates and fees when you borrow money. You might also qualify for lower loan amounts and credit limits. 

If you want to rebuild positive credit after a repossession, certain types of accounts do offer easier qualification criteria. Certain secured credit cards and credit builder loans, for example, might be a good fit in this situation. 

Can Repossessions Be Removed from a Credit Report? 

There are two potential ways to remove a repossession from your credit report before the law requires it to be deleted. You can dispute a repossession or you can try to negotiate with the creditor to remove it early. 

1. Disputing a Repossession

The FCRA lets you dispute any item on your credit report that you believe is incorrect. So, if a repossession on your credit report features a wrong balance, invalid dates, or other questionable information, you can dispute it and ask the credit bureau to investigate. 

A credit bureau generally has 30 days to investigate a dispute. If the creditor doesn’t verify the disputed account as accurate within that time frame, the bureau must delete the account from your report. 

2. Negotiating for Early Removal

Credit reporting is voluntary. Creditors report repossessions and other account information to the credit bureaus because it helps them collect debts. But a credit can opt not to report an account (or ask a credit bureau to remove an account) if it chooses to do so.

It’s difficult to convince a creditor to remove an accurate repossession from your credit report. Yet it doesn’t hurt to ask. If you have the money to bring your loan current (or settle the deficiency balance on an already repossessed vehicle), you can ask a creditor or collection agency if it’s willing to accept payment in exchange for deletion. 

In rare cases, a creditor or debt collector might be willing to negotiate the early removal of a repossession from your report. If you’ve experienced a hardship, like a job loss or illness, you can share these extenuating circumstances with your creditor. 

There’s no guarantee this approach will work, but you might find someone who is willing to help you. Above all, if a creditor or collection agency agrees to delete a repossession from your credit report, get the offer in writing. 

Should I Pay Off a Repossession? 

Paying off a repossession may or may not improve your credit score. The score impact (or lack thereof) largely depends on which credit scoring model a lender uses. 

Some newer credit scoring models ignore collection accounts with zero balances. Older scoring models (like the type of FICO Score currently used in the mortgage industry) treat a $0 balance collection roughly the same as a collection with a balance. With older scoring models, paying or settling a collection often does little to nothing to boost your score. 

Yet, credit score impact aside, you may still want to pay off your deficiency balance if you can afford to do so. If you don’t pay off a repossession, there could be unpleasant consequences.

What Happens If I Don’t Pay a Repossession? 

Having a repossession with an outstanding balance may cause several potential problems. 

  • The lender or collection agency might sue you. Should you lose the lawsuit — either due to lack of a solid defense or through default after not showing up — the judge will enter a judgment against you. In some cases, a judgment could open the door to the lender taking further action against you, like a wage garnishment.  
  • A judgment can make it hard to qualify for new loans. Judgments no longer appear on credit reports thanks to the National Consumer Assistance Plan (NCAP). Yet they may still cause problems when you apply for certain types of loans. Mortgage applications, for example, commonly include a public records search which may reveal judgments filed against you. Some lenders require all judgments to be paid before you can qualify for new financing. 

How Can I Dispute a Repossession on My Credit Report? 

You can dispute a repossession by sending a letter to the credit bureau that’s reporting wrong information on your credit report — Equifax, TransUnion, or Experian. The credit bureau generally has 30 days to investigate your claim. (If you send supplemental information after a dispute has already begun, the bureau may have 45 days to investigate.) 

In addition to mailing your dispute to the credit bureaus, you can also submit disputes online, over the phone, or via fax. Online disputes may be the simplest way to send disputes, but they don’t always produce the best results. 

Remember, although you have the right to handle the dispute process on your own, hiring a credit repair professional may work to your advantage. A credit repair specialist can help you manage the dispute process and walk through potential options if the item you dispute is verified as accurate. 

Credit Saint is a New Jersey-based credit repair company with more than 15 years of experience and an A+ rating from the Better Business Bureau. Call 877-637-2673 to schedule a free credit consultation with a Credit Saint counselor today. 

How to prevent repossessions in the future

The easy answer here is that to prevent your vehicle from getting repossessed again down the line, you just need to pay your car loan on time. And that is true.

But the deeper issue here is probably your budget or your income or some combination of the two. Because at the end of the day, when you go late on paying off a debt, it’s either because you’re spending more money than you take in, or you’re simply not making enough money to finance your lifestyle—or likely both.

Here are some tips for making sure you stay out of debt and don’t find yourself in this situation again: 

  • Only take on a monthly payment you can reasonably afford.
  • Make sure to include a line item in your monthly budget for your car loan.
  • If you find yourself falling behind on payment, try to restructure the loan with the lender—some of them may be understanding.
  • If you can’t restructure the loan, return the car and pay off any outstanding debt as soon as possible

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