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In this Article: How to remove a repossession from your credit report.
A repossession hurts your credit score in a big way. Not only do you lose your car, but you lose your chance to secure lending from most financial institutions for a few years at a minimum.
What if you could remove a repossession from your credit report, though? It may be possible. Check out the steps below.
What is a Repossession?
A repossession is the lender’s legal right to take away a piece of property if you do not pay the account as agreed. The lender then tries to sell the piece of property to recoup some of the money they lost.
For example, if you miss three or four car payments and do not communicate with the lender, they will likely take possession of your car.
Can a Repossession be removed from your Credit Report?
Repos stay on your credit report for 7 years. If you want it removed earlier, you will have to get creative.
It is possible to get a repossession removed from your credit report if you negotiate with the lender, successfully file a dispute, or hire a credit repair company.
The easiest way to remove a repossession from your credit is by hiring a credit repair company, like Credit Saint. They know the ins-and-outs of removing repos from credit reports.
How to Remove a Repossession from your Credit Report
1. Negotiate New Payment Terms
The best thing you can do is stay in contact with the lender. Don’t ignore the phone calls or requests for payment. Instead, talk to your lender. Let them know what’s going on – why you fell behind.
You may find that the lender will work out different arrangements. Between you and me, they don’t want to repossess your car.
It costs them money to hold onto it, market it, and sell it. They come out on the losing end. If there’s a way for you to make good on your loan, they may work with you.
They may offer lower payments in a longer-term, or a lower interest rate to lower the payment, but keep the same term.
Some lenders add the missing payments onto the end of the loan, letting you start fresh, and extend the term by adding the number of months you missed.
You will not know until you ask. What’s the worst they can say? ‘No’?
2. File a Dispute
If any of the information regarding the repo is not accurate, file a dispute. Errors could mean they spelt your name wrong, reported the wrong missed payment dates, reported the wrong outstanding balance, or any other error you can find.
Dispute the error in writing (each bureau has an online process) and provide proof of why you think the information is incorrect.
The credit bureau has 30 days to validate the information, or they must delete the repo from your credit report.
If they validate it but find the errors you reported are mistakes, they must delete the repo from your report as well.’
>> More:How to Dispute an Error on Your Credit Report
3. Hire a Credit Repair Company
If dealing with the credit bureaus is too overwhelming, consider hiring a credit repair company. The right company will find loopholes in the reporting. They know how to look for even the smallest errors.
Most of what they do is outlined in the steps above, but they have techniques and experience to work with the smallest details that may get the account removed from your report.
Credit repair companies, like Credit Saint, know the ins-and-outs of removing negative items from credit reports. They have successfully removed thousands and continue to do so each day. This is honestly the best option.
>> More: Credit Saint Review
How Will a Repossession Affect My Credit Score?
Repossessions, like most other negative credit information, stays on your credit report for 7 years. It lowers your credit score the most during the first couple of years and slowly tapers off.
If you have good credit otherwise (you make your payments on time and do not overextend your credit), your credit score should bounce back after a couple of years.
Repos cause the most damage to people with good or excellent credit scores. You can lose up to 100 points if you have a credit score of over 700.
If you already have average or poor credit, you will not lose as many points, but will still have a repo on your credit report.
Why Do Repossessions Happen?
Banks repossess your property when you stop making payments. You agree to make the payments on time each month. If you don’t, the bank can cut their losses and take the item you purchased back.
Banks do this when they think they don’t have a chance of securing the funds from you. You may or may not have a warning that the repo is occurring – most states don’t require it.
Can I Get a Car Loan After a Repossession?
Some lenders may give you a loan after a repossession but get ready to pay through the nose in interest! It’s best to have the repo removed from your credit report first.
Try negotiating with the lender or filing a dispute. If that does not help, work with a credit repair company to get the repo taken off your report.
Worst case scenario, you may have to wait the 7 years until the repo falls off and then you can get a car loan.
Can I Get a Mortgage After a Repossession?
Like any loan, mortgage lenders look at your credit history. If they see a repossession, they may hesitate to give you a loan.
Lenders will likely ask questions about the repo and what led to it. They may also want proof that you have fixed the problem and are financially stable.
Whether or not you can get a mortgage really depends on your credit score.
The longer you wait after the repo, the less damage it will cause to your credit score, which increases your chance of mortgage approval.
Is Voluntary Repossession Better for Your Credit?
There are two types of repos – voluntary and involuntary.
As you probably guess, voluntary means you give back whatever you purchased (think a car or home) without a fuss. Banks do not want to come looking for you – you turn the piece of property in.
Involuntary means you didn’t turn the car in, and the bank came out to you.
While a voluntary repo helps ease your mind (you don’t have to worry about waking up to your car and it being gone), it doesn’t affect your credit any differently.
A repo is a repo, and it hurts your credit.
Do I Still Owe Money After a Repossession?
Yes, giving the car back doesn’t necessarily satisfy the money you owed. If the bank repos your vehicle and you owe $10,000 on, and they can only sell it for $5,000, you still have to pay the remaining $5,000.
If you don’t work out a payment arrangement or figure out how to pay it, they may file a suit to get the difference.
How to Prevent a Repossession
While no one can predict what happens in the future, there are a few ways to prevent a repossession:
- Only borrow what you can afford. Think long-term. If you borrow for five years, think about the payment you take on. Are you going to go down to one income in the next five years? Could your job landscape change? Are you going to take on any other large expenses in that time (college, a mortgage, etc.)?
- Set up automatic payments. Don’t leave your payments to chance. Set up automatic payments, so you never miss one.
- Talk to the lender. If you can’t make your payments, talk to your lender, don’t ignore the issue. They may be able to work something out with you, whether a payment arrangement or a longer-term.
How Can I Improve My Credit After a Repossession?
If you have to go through a repo, it’s not the end of the world. Put your best foot forward and use these credit hacks to improve your credit:
- Pay all future bills on time. Don’t miss any payments. Your payment history is 35% of your credit score.
- Don’t close old revolving accounts. It’s easy to close credit cards so you can’t use them, but that hurts your credit score. Keep them open and just lock them up somewhere that you can’t easily access.
- Don’t charge more than 30% of your credit limit and pay your credit card balances off as quickly as possible.
- Don’t apply for new credit unless you absolutely need it.
Wrapping Up: How to Remove a Repossession from Your Credit Report
While a repossession is not a good thing, there are ways to remove it from your credit report either quickly or just by waiting it out.
Make sure to know your rights. As a consumer, you are protected under the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA).
Your best bet is to prevent it by working with the lender. Most lenders will try to work it out with you if you are honest and communicate with them.
If it comes down to it and you have a repo, though, you can get your credit back. Strategic credit repair is the best thing you can do right now.
While you wait, do what you can to rebuild your credit. Show lenders, you are financially responsible despite the mishap and rebuild your credit score one step at a time.
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