Can You Take a Repo Off Your Credit?
Understand how a repossession impacts your credit and what steps you can take to manage its effects and rebuild your financial future.
A repossession occurs when a lender reclaims an asset, typically a vehicle, due to a borrower’s failure to make timely payments on a secured loan. This event significantly impacts an individual’s financial standing, complicating access to future credit and financial products.
How Repossession Impacts Your Credit Report
A repossession is recorded as a derogatory mark on a consumer’s credit report, typically reported to Equifax, Experian, and TransUnion. This signals a serious credit event, significantly lowering credit scores as payment history is a major factor. The exact impact on a credit score can vary based on an individual’s overall credit profile and the specific scoring model used.
A repossession generally remains on a credit report for up to seven years. This period typically begins from the date of the original delinquency that led to the repossession, not the repossession date itself. Both the repossession and any associated deficiency balance can appear on the credit report. A deficiency balance is the remaining amount owed on the loan after the lender sells the repossessed asset and applies the proceeds to the outstanding debt. This remaining balance can also be sent to collections, further impacting the credit report.
Accessing and Reviewing Your Credit Reports
After a repossession, obtaining and carefully reviewing credit reports from all three major credit bureaus is important. The official source for free credit reports is AnnualCreditReport.com, jointly operated by Equifax, Experian, and TransUnion. Consumers are entitled to a free copy of their credit report from each bureau weekly through this website. These reports provide a comprehensive overview of how the repossession is recorded across different agencies.
When reviewing credit reports, scrutinize the details of the repossession entry for accuracy. Verify items like the creditor’s name, account number, exact repossession date, and reported amount owed. Examine payment history to ensure all reported payments and delinquencies are correct. Note any discrepancies, such as incorrect dates or amounts. Checking all three reports is recommended, as information may vary between bureaus.
Options for Addressing a Repossession Entry
Once credit reports have been accessed and thoroughly reviewed for the repossession entry, consider specific actions. If any inaccuracies are identified, disputing them with the credit bureaus is the primary action. Disputes can typically be initiated online, by mail, or by phone directly with Equifax, Experian, and TransUnion. When filing a dispute, clearly explain the inaccuracy and provide supporting evidence, such as proof of payments or other documentation that contradicts the reported information.
The credit bureaus are required to investigate disputes within 30 days, extending to 45 days with additional information. If the investigation confirms the information is inaccurate or cannot be verified by the furnisher, the entry must be corrected or removed. If accurately reported, removal is more challenging, as credit bureaus report truthful information.
Beyond formal disputes, negotiate directly with the original lender. A strategy is a “pay-for-delete” agreement, where the consumer offers to pay the outstanding deficiency balance in exchange for the lender agreeing to remove the repossession. Lenders are not obligated to agree to such terms, and it is rare, as it goes against standard reporting practices. If a pay-for-delete is agreed upon, obtain the agreement in writing before making any payment.
Another approach is requesting a “goodwill deletion” from the lender. This involves writing a letter explaining the circumstances and asking the lender to remove the derogatory mark as a gesture of goodwill. Goodwill requests are most effective when the consumer has a history of responsible payments and the repossession was an isolated incident due to unforeseen hardship. Lenders are not required to grant goodwill deletions, but some may consider it, especially if the account was in good standing prior to the event.
Steps to Rebuild Your Credit
Even with a repossession on a credit report, proactive steps can improve credit health and mitigate its impact. Establishing new positive credit is a key strategy. This can involve obtaining a secured credit card, which requires a cash deposit as collateral, allowing for responsible use and on-time payments to be reported. Another option is a credit-builder loan, where consistent payments are made into a savings account over time, helping to build positive payment history.
Consistently making all future payments on time is important, as payment history is the most influential factor in credit scoring. Even with a past repossession, a pattern of timely payments on all other accounts demonstrates financial responsibility. Keeping credit utilization low, ideally below 30% of available credit, contributes positively to credit scores. This indicates financial prudence.
Regularly monitoring credit reports ensures accuracy and tracks rebuilding progress. This allows for early detection and dispute of inaccuracies. Paying down other existing debts, especially those with high interest rates, can free up funds, improve debt-to-income ratios, and strengthen a credit profile. These actions, while not immediately removing the repossession, contribute to a healthier credit standing long term.