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A repossession can stay on your credit report for up to seven years, impacting your credit score and limiting your financial opportunities. The good news is that, in some cases, a repossession can be removed from your report. A repossession can be removed from your account if it's illegitimate or contains false information. Keep reading to find out how to remove a repossession from your credit report.
A repossession occurs on loans that are secured by an asset, such as an auto loan. When the borrower violates the loan agreement terms and stops paying their loan to the point the loan goes into default, the lender has the right to repossess the secured asset.
The repossession happens so the lender can sell the asset and try to get some of their money back on the loan. If there's still an outstanding balance after the sale, the borrower is on the hook to pay the difference. The lender may choose to sue you to recover the rest of the balance.
The exact time a repossession happens varies based on the lender, the contract terms and the state laws. In most states, a lender can repossess your car after you've missed just one payment. To know exactly when you're in danger of repossession, look over your contract.
There are two types of repossessions: voluntary and involuntary.
When a repossession happens, it's added as a negative line item to your credit, whether it was voluntary or involuntary. It's a situation where you stopped making payments on a loan, so it reflects poorly on you as a borrower.
A repossession can stay on your credit report, and impact your credit score, for up to seven years. If there's an outstanding balance after the sale of the asset, the balance will show on your credit report.
If you can afford to do so, it's probably in your best interest to pay off the loans outstanding balance. This will reduce your risk of being sued. Additionally, it can act in your favor with future lenders. Paying off the balance won't remove the negative item from your report, but it will show future lenders that you took the initiative to pay off what was due.
A repossession typically follows these steps:
If a repossession is entirely valid and accurate, the only way you could get it removed (other than waiting seven years) is if you can negotiate with your lender to remove the item from your credit report in exchange for paying the debt in full. If the lender agrees to this proposal, make sure you get everything in writing.
Note that not all lenders will agree to this proposal. Still, it's worth trying, especially if you have an outstanding balance after the repossession. Your lender may be willing to work with you because the repayment plan means they don't have to file a lawsuit to get their money back.
You can also remove false repossessions from your credit report ("false" meaning that the repossessions aren't your repossessions or they contain inaccurate information). Under the Fair Credit Reporting Act (FCRA), every consumer has the right to an accurate credit report and can file a dispute on any incorrect information. If the repossession on your credit report includes wrong dates, names, balances, addresses or other incorrect information, you can file a dispute.
You can file a dispute with any of the three major credit bureaus (Equifax®, Experian® and TransUnion®) that have an incorrect repossession on your credit report. When filing a dispute letter, make sure to include:
After you file, the credit bureaus will ask the lender to confirm the information they provided. If the lender can't verify or doesn't respond within 30 days of your filing, the information will be removed from your credit report.
Note that filing a dispute doesn't always mean your repossession will be removed from your credit report. Suppose the lender provides the credit bureaus with the correct information instead (such as the right account balance or correct dates). In that case, your credit report will simply be updated to reflect the new information.
Repossessions can stay on your credit report for up to seven years. As soon as the repossession appears, your credit score will most likely drop. And the repossession will potentially continue to keep your score down while it remains on your report (although, with each year, it will have less of an impact).
In addition to impacting your credit score, a repossession on your credit report may affect your ability to be approved for future loans. For example auto lenders may hesitate to approve you for a new loan. A repossession shows that you couldn't uphold your end of a loan contract, which makes you a high-risk borrower.
However, if your credit report shows you either voluntarily surrendered your car or willingly paid the outstanding balance after repossession, they still may consider your loan application. This can show that you worked with your lender and tried to make things as right as possible.
If you can't remove your repossession from your credit report, the next step is to rebuild your credit. You can improve your credit by following sound financial behaviors, like:
Another critical step in keeping your credit score as high as possible is frequently reviewing your credit report. Credit reports can have errors that unnecessarily keep your score down. At CreditRepair.com, our credit repair specialists can review your reports for you and file disputes on your behalf so you know you have an accurate and fair credit report.
Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.
