How to Remove a Repossession from Credit Report
November 6, 2019
Repossessions are a negative item listed on your credit report that can hurt your credit score. Repossessions note the seizure of any assets due to late or delinquent payments. If a repossession is listed on your credit report, there is still a way to rebuild your credit and potentially remove the listing from your credit report.
Can Repossessions Be Removed From a Credit Report?
Repossessions can be removed from your credit report in some situations, especially if they are inaccurate or unfair. There are a couple of things you can do to try to remove one:
Negotiate with your lender: Your lender loses money when they repossess. Paying off your debt is cheaper and more convenient for them, even if you pay less than what you owe.
You can try renegotiating with them to see if you can settle your debt and remove it from your credit reports. If they agree to this, make sure to get it in writing and that you follow through with the terms you and your lender agreed to.
- File a dispute: If you go through your credit reports and see anything reported inaccurately about your repossession, you can dispute it with the credit bureaus.
If you do this, the credit bureaus must investigate and will ask the creditor to verify the information regarding your repossession. If the lender can't prove that your debt is accurate, fair or substantiated , then the credit bureaus can remove the repossession from your credit reports.
Your window to negotiate with your lender may be short or already closed if they’ve already repossessed your asset. In this case, filing a dispute is the option to consider.
How Can I Dispute a Repossession From My Credit Report?
To attempt to remove a repossession from your credit report, you’ll need to initiate a credit dispute and prove to the credit bureaus that the repossession is fraudulent, outdated or otherwise inaccurate. Here are a few steps you can take:
- Check your credit report and review the reported information. You’re entitled to one free credit report from each of the credit bureaus every year from Annual Credit Report.
- Take note of any errors on your credit report. These include incorrect dates, misreported amounts and more.
- Gather evidence that supports your claims. Evidence includes proof of your identity, the incorrect account information and documents that prove the information is false.
- Report the error to the credit bureau. They must investigate the dispute within 30 days and report the results back to you afterward.
- If the lender is unable to produce evidence or otherwise substantiate the information, then the credit bureaus are required to remove the account from your credit report.
- If the lender is able to prove the account is fairly and accurately reported, the account will not be removed.
How Long Do Repossessions Stay on My Credit Report?
A repossession can stay on your credit report for up to seven years, making it harder for you to qualify for other loans.
Repossessions have a severely negative impact on your credit and can show lenders that you may not be able to make payments on the property you purchase.
How Do Repossessions Affect My Credit Score?
When you have a repossession on your credit report, you can expect your credit score to drop, but the specific amount depends on your credit situation. Here are some ways that repossessions can affect your credit:
- Late payments: Items can be repossessed because you missed several payments. Those will show on your credit report, which hurts your credit score.
- Repossession: Once something has been repossessed, the lender usually reports it to the credit bureaus and it may show up on your report for future lenders to see.
- Collections: If you still owe money even after the lender has resold the car, they might decide to hand over your account to a collection agency. That collections account can appear on your credit report and lower your score.
All of this is telling other lenders that you can't be trusted to pay back what you owe and as a result, they're less likely to approve new credit applications. Apart from losing your property, a repossession could lead to several negative items on your credit report, which will damage your credit score.
Why Do Repossessions Happen?
Repossessions occur when an asset purchased on credit is behind on payments—usually for three months or more. If a lender thinks the owner is not going to catch up on payments, they may decide to repossess the property.
Repossessions are most common with car loans, but they can apply to any loan that involves collateral, like buying furniture on credit with a furniture store.
How Do Voluntary Repossessions Affect My Credit?
A voluntary repossession, sometimes referred to as a vehicle surrender in the case of a car, is when a consumer can no longer make payments on the property they bought and voluntarily gives it back to the lender. There is a common misconception that a voluntary repossession is better for your credit than a forced repossession. In financial and credit terms, they're very similar.
Whether you voluntarily ask your lender to come and pick up their property or you are forcibly repossessed, the message is the same: you are unable to pay your loan and the lender is taking back their property.
One benefit of voluntarily surrendering your property is that it is less emotionally draining and embarrassing than having a forcible repossession, which can happen at any time and any place. Voluntarily repossessing your property gives you a bit more control and usually ends up costing less.
Do You Still Owe After a Repossession?
Yes, a lender can come after you for money owed on the car known as a “deficiency balance.”
Once a creditor repossesses the collateral, they usually try to resell it to recoup their money. For things that depreciate over time, like cars, the lender won't recoup the full amount of the loan because the car is worth less than when the consumer first bought it.
When a lender sells items for less than what is owed, they'll come after the purchaser for the difference.
Can I Get a Loan After a Repossession?
The short answer is yes, you can still get a loan after a repossession. However, there are very few lenders who are willing to take a risk on someone with bad credit or negative marks on their credit report. Those who are willing may require you to pay higher interest rates and fees.
However, there are reputable lenders out there who have approved applications with repossessions on them. For better chances of approval and better interest rates, you can find someone with good credit to cosign the loan for you.
You can also work to improve your credit and payment history to make yourself a better candidate.
How to Prevent a Repossession
Many people go through financial troubles at some point. If you're struggling to stay on top of your payments, you should communicate this with your lender to see if you can change your payment plan.
For car loans, if you know your financial hardships are going to be temporary, you can talk to your lender and see if they'll let you skip payments for a month or two. Some auto lenders allow this without penalizing you, but you need to communicate with them or else you will be penalized. Working things out with your creditor may prevent a repossession and allow you to keep the property.
How Can I Improve My Credit After a Repossession?
If you do get approved for a loan or a new line of credit after a repossession, making payments on time can help you build your credit back up.
If you dispute the repossession and can't get it removed, then you need to give it some time. Your credit score will eventually improve and the repossession will come off your credit reports. However, as you open new accounts and make on-time payments, you should see your score improve.
If you're struggling with a low credit score or other negative items on your credit reports, Lexington Law Firm can help you through our suite of credit repair services. For over a decade, our team of consumer advocates has helped clients work to challenge negative information that is unfair, inaccurate and unsubstantiated. Contact us today for a free, personalized credit report consultation.