How to Get a Repo Off Your Credit Report

Impact of Repossession on Credit

A repossession occurs when a lender takes back an asset, such as a vehicle, due to a borrower’s failure to make payments. This event is a significant negative entry on a credit report, indicating a serious default on a loan obligation. Individuals can take steps to mitigate its long-term effects on their financial standing.

A repossession remains on a consumer’s credit report for up to seven years from the original delinquency date. This can substantially lower credit scores, potentially by 100 points or more, depending on the individual’s credit history. The precise impact varies, influenced by the overall credit profile and other negative marks.

A repossession on a credit report creates obstacles when securing future credit. Lenders view it as a high-risk indicator, making it difficult to obtain new loans, credit cards, or mortgages at favorable interest rates. Some landlords also check credit reports, which can affect housing applications.

A “deficiency balance” often arises when the repossessed asset’s sale price, typically at auction, is less than the outstanding loan amount plus repossession and sale costs. The borrower remains responsible for repaying this deficiency, and the lender may pursue collection efforts or legal action to recover the amount owed.

Understanding Your Credit Report and the Repossession Entry

Understanding how a repossession is reported on your credit file is the first step. Consumers are entitled to a free credit report from Equifax, Experian, and TransUnion once every 12 months. Access these reports through AnnualCreditReport.com for a comprehensive review of your credit history.

Locate the repossession entry on your reports. Pay close attention to details such as the account status, which should accurately reflect “repossessed” or “charged off.” Verify the original creditor’s name, the date of last activity, and the reported balance, including any deficiency amount.

Checking for inaccuracies within this entry is important. Common errors include an incorrect original delinquency date, an inflated deficiency balance, or the account being reported as open when it should be closed. If the debt was discharged in bankruptcy but still reported as active or outstanding, this also represents an inaccuracy.

Verify the deficiency balance: the difference between the amount owed on the loan and the proceeds from the sale of the repossessed property, after accounting for all sale-related expenses. Request detailed accounting from the original creditor to confirm the accuracy of this amount. Understanding this figure is important for any potential negotiations.

Direct Actions to Address the Repossession

After reviewing your credit reports and identifying inaccuracies, dispute them with the credit bureaus. If you find discrepancies, initiating a dispute is a primary course of action. You can submit disputes online, by mail, or phone, providing specific details of the inaccuracy and supporting documentation, such as payment records or communication with the lender.

The credit bureau has 30 to 45 days to investigate your dispute with the original creditor. If the information cannot be verified as accurate, the entry should be removed. Even if accurate, pursuing a dispute can prompt the creditor to update or remove the entry.

Beyond disputing inaccuracies, negotiate directly with the original creditor regarding the deficiency balance. You might propose a lump-sum settlement for less than the full amount owed, such as 40% to 60%. Alternatively, negotiate a structured payment plan to repay the deficiency over an extended period.

A “pay-for-delete” strategy involves negotiating with the creditor to remove the repossession entry in exchange for payment of the deficiency balance. While not guaranteed, as creditors are not obligated to agree, it can incentivize them to update your report. If an agreement is reached, ensure you receive it in writing before payment. After settling the deficiency, obtain written confirmation, such as a “paid in full” or “settled” letter. This documentation ensures the credit report is updated and helps with future disputes.

Exploring External Assistance

External assistance can support those navigating a repossession’s credit impact. Non-profit credit counseling agencies provide financial education, budgeting, and debt management services. They can help individuals develop payment plans, negotiate with creditors, and improve overall financial health.

Credit repair companies challenge inaccurate or unverifiable information on credit reports. While individuals can undertake many of these actions, these companies provide convenience and expertise in the dispute process. Research their reputation and ensure ethical operation, avoiding those that promise unrealistic results or demand upfront payment.