Going through a repossession can make you feel powerless. Not only do you lose your property, but your credit score may be left in poor shape. Your credit report lists your bill payment history, current debt, and loans.
Additionally, lawsuits, bankruptcy, and repossessions appear on the report. Before you ask, “how long does a repo stay on your credit report?” we have an answer.
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Repossession and Your Credit Score
While vehicles are the most commonly repossessed assets, other typical assets include:
- Real estate
Any property tied to a loan can be repossessed if the account becomes delinquent. To add insult to injury, repossession has the potential to drop your credit score between 50 and 150 points.
Unfortunately, most people already have several missed payments by the time a repossession occurs. Several missed payments can wreak havoc on the score long before repo occurs.
Most lenders wait because repossessing an asset after a missed payment is expensive. For instance, if you have a car loan, the lender may only receive about 30% of the loan value after repossession. It makes more sense to wait until there is no other recourse.
In most cases, don’t count on seeing the asset again. It is near impossible to retrieve your asset unless you can afford to pay off the debt before the lender sells it. However, the lender cannot take belongings unaffiliated with the loan. For instance, if you had belongings in a repossessed vehicle, you can retrieve them.
The only exception is if the belongings require tools to remove. If you upgraded your vehicle’s stereo before repossession, the bank could sell the car with the stereo inside.
How Long Does a Repo Stay on Your Credit?
The repossession remains on the credit report for seven years. The countdown to removal begins the day you missed the first payment. The report contains the original date of the delinquency and the last payment date. Additionally, the date the account can be removed from the report is also listed.
After seven years, you do not need to take any action. The bureaus delete the account automatically.
Removing a Repo From Your Credit Score
If there are inaccuracies about your repossession, you can dispute the information with the credit bureaus. The bureau investigates the report and interviews the creditor to have the repossession removed. If the lender cannot verify the information is correct, substantiated, or fair, the bureaus can remove the repossession.
Since the lender operates at a loss with repossession, try to negotiate the debt. If the creditor is willing to settle the debt, ask them to remove it from your report too. Make sure to get any agreement in writing.
Adding a Note About Your Repo
While credit reports provide a snapshot of your finances, they don’t give any context. If someone has a high score with no marks against them, context doesn’t matter. However, if you’re in a position where you cannot afford to pay your bills, it is beneficial to explain why.
A consumer statement shows that you aren’t an unreliable borrower but that you are involved in a situation outside your control.
To add a note, first access your credit report. Ensure that all of the information is accurate and that there are no mistakes. Following your due diligence, go to each major credit-reporting bureau and supply a statement to their respective dispute centers.
Keep the statement concise with fewer than 100 words. A note to your report will not change your credit score. However, it may alter the way lenders perceive you. Once you overcome your financial hurdle, contact the bureaus to remove the statement as quickly as possible. Leaving the message too long alerts new lenders you had a payment issue in the past.
How Can You Rebuild Your Credit Following a Repossession?
It’s natural to wonder, “how long does a repo stay on your credit?” Seven years is a long time to go without seeking financial assistance or purchasing a vehicle. Most lenders will not accept borrowers unless the repossession happened 12 months ago or more. In the meantime, rebuild your credit.
Keep Balances Low
Keep your utilization ratio at 30% or below for an optimal score. Lenders look at the number of funds you borrow compared to your limit. Hitting the limit too often has a negative impact on the overall score.
Extend the Limits
To decrease utilization, increase your limit. Creditors consider several factors when deciding whether to increase an individual’s limit. The lender may look at the following before making a decision:
- Do you have any missed payments
- If you typically pay more than the minimum payment
- If you have outstanding balances
Those who do not have outstanding balances, pay on time, and go above and beyond the minimum obligations have a higher chance of an increased credit limit.
Leave Credit Accounts Open
It’s tempting to close unused cards if you don’t use them. However, closing an account negatively impacts your score. When you close an account, it may raise your utilization. Likewise, it shortens your history. The age of your accounts affects your score.
Seek Credit Counselling
For help with your financial problems, credit counseling provides an opportunity to talk with a professional about your financial situation. In counseling, debtors learn to develop a personalized plan and budget.
Learn To Manage Your Finances and Credit Following a Repossession
Seven years may feel like a long time, but you can build your credit back up in the meantime. While the repo stays present on your credit report, it doesn’t mean that you can’t find other ways to rebuild.
We believe that one of the best ways to take control of your future is through financial education. After repossession, you shouldn’t only ask, “how long does a repo stay on your credit?” but also, “how can you rebuild following the repo?” At Fiscal Tiger, we want to help enhance your financial education. Contact us as soon as possible to find out how to cope after a repossession.
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