How Long Does a Repo Stay on Your Credit?

A repossession occurs when a lender seizes collateral, such as a vehicle, due to a borrower’s failure to make payments as agreed upon in a loan contract. This typically happens after a loan goes into default, meaning the borrower has missed payments or violated other terms. Once a repossession takes place, it is reported to the major credit bureaus and appears on an individual’s credit report as a derogatory mark, indicating to potential lenders that a previous financial obligation was not fulfilled.

Repossession on Your Credit Report

A repossession generally remains on your credit report for seven years, as established under the Fair Credit Reporting Act. This seven-year period begins from the date of the original delinquency that led to the repossession, not from the date the asset was actually repossessed. For instance, if you missed a payment in January and the repossession occurred in March, the seven-year countdown starts in January. Even if the outstanding debt, often called a deficiency balance, is paid off after the repossession, the negative mark will stay on your credit report for the full seven-year duration. While resolving the debt is important for your overall financial health, it does not remove the repossession record from your credit history sooner.

Impact on Credit Scores and Future Credit

A repossession is a severe negative mark that can significantly lower credit scores, including FICO and VantageScore. The exact drop in score varies, but it can be substantial, potentially 100 points or more, depending on your credit history and other factors. Payment history is the most influential factor in credit score calculations, accounting for about 35% of a FICO score, so a repossession directly impacts this component.

A repossession can make obtaining new credit challenging. Lenders view a repossession as a high-risk indicator, making it difficult to secure new loans, credit cards, or even rental agreements. If credit is extended, it will likely come with less favorable terms, such as higher interest rates and larger down payments. While the repossession remains on the report for seven years, its impact on your credit score lessens over time as it ages, provided you establish new positive credit behaviors.

Checking for Accuracy and Disputing Errors

After a repossession, obtain copies of your credit reports from all three major credit bureaus: Equifax, Experian, and TransUnion. You are legally entitled to a free copy of your credit report from each bureau once every 12 months through AnnualCreditReport.com. Reviewing these reports helps ensure the accuracy of the reported repossession and related entries.

When examining your credit reports, look for specific details related to the repossession, such as the account status, the date of original delinquency, and the reported amount owed. Check for any discrepancies in dates, balances, or whether the account is listed more than once. Identifying inaccuracies or outdated information is an important step in managing your credit profile post-repossession.

Rebuilding Credit After Repossession

Rebuilding credit after a repossession requires consistent, positive financial behavior. Making all other payments on time is a primary step, as payment history is the most important factor in credit scoring. Setting up automatic payments can help ensure you do not miss due dates.

Maintaining low credit utilization is another important strategy; this refers to the amount of revolving credit you are using compared to your total available credit. Keeping your credit utilization ratio below 30% can positively influence your score. Paying down existing debts, especially high-interest ones, can also contribute to improving your credit score. Securing new, responsible credit, such as a secured credit card or a credit-builder loan, can help establish a positive payment history.