How Long Does a Repossession Stay On Your Credit Report?

Jaron Pak
A pen sits on top of a document labeled "repossession."

A repossession (or “repo” for short) will stay on your credit report for seven years. Repossession takes place when you fail to make payments on a car or another expensive item that you paid for with a loan.

When this happens, the borrower is technically the owner of the item. If you fail to pay back the owed money for an extended period, the lender can reclaim the item itself to pay for the unpaid remainder of the debt.

A repo is a negative financial event and is considered derogatory. Most derogatory marks stay on a credit report for seven years — something referred to as the Seven Year Rule.

Foreclosures, tax liens, and collection agency claims all last for seven years. There are some exceptions though. For instance, a hard credit inquiry only lasts two years, while bankruptcy can stick on your report for as long as a decade before falling off.

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How Does a Repossession Affect Your Credit?

As is the case with all derogatory marks, when a repossession shows up on your credit report it harms your credit. Your score can drop significantly and you may fall below the “Good” credit range of the FICO credit scoring model.

When your score drops due to repossession, it can have a domino effect of undesirable repercussions on your credit. For instance, you may find that:

  • You can’t pass a credit check to get approved for housing.
  • You have to pay a higher security deposit if you do get housing.
  • You are denied a loan.
  • You only qualify for loans and credit cards with very high interest rates.
  • You struggle to save or meet financial goals.

While life does go on after a repossession, it can feel like an uphill battle for a while. It’s important that you immediately begin to work on ameliorating the situation.

How to Remove Repossession From Your Credit Report

There are a few different ways you can attempt to fix the situation and even remove the derogatory mark from your credit report. These include:

  • Negotiating new payments with your lender to get your car or other items back and pay off the debt in a manageable manner.
  • Using a loan rehabilitation program to work out new terms on paying back the owed money.
  • Challenging the repossession with the help of an attorney if you feel the event is unjustified.

If you can manage to resolve the issue of the repossession, you may be able to remove the actual derogatory mark from your credit report before the seven years are up, as well.

Once you’ve positively resolved the initial issue, draft a dispute letter to the credit bureaus, explaining your situation and requesting that the mark be removed. You can also send a goodwill letter to the lender asking them to proactively remove the item from your report as well.

Neither of these is a foolproof solution. However, they are certainly worth a try if they can truncate the amount of time that the mark will be on your credit report.

How to Repair Your Credit After Repossession

It’s worth at least trying to get the repossession off of your credit report. Whether you’re successful or not, though, you should also take steps to start repairing your credit.

This process should begin as soon as possible (i.e. don’t wait until the item falls off your report seven years from now) and should consist of activities such as the following:

Pay Off Other Debts

Excessive debt can hurt your credit. Full stop. If you have a lot of debt apart from the loan associated with your repossessed item, do your best to start paying it down.

If you have any other delinquent or default accounts, prioritize these. It’s best to catch them before they get onto your credit report. However, if they do get onto your report, once paid back, you will want to address them similarly to how you approached the repossession with either dispute or goodwill letters.

Make All Payments on Time

Your payment history makes up over a third of your credit score. As such, it’s essential that you pay all of your bills on time with no exceptions.

Paying every balance in full is the best option. However, you should at least make the minimum payments every single time. Set up autopay and create reminders to help you make your payments consistently.

Check Your Credit Report

You can get a free copy of your credit report from each of the three major credit bureaus once per year. Do so and review your report every year.

This is a great habit, as it allows you to fix any errors that you find. It also allows you to stay aware of the state of your credit and can help you catch and resolve derogatory marks if and when they arise.

Use Credit Responsibly

Many other financial habits are worth cultivating in your life, as well, such as:

  • Paying down your non-revolving credit and only taking out new loans when you absolutely need them.
  • Using your revolving credit regularly and then fully paying off the balance every month.
  • Making a budget, updating it regularly, and sticking to it at all times.
  • Creating a financial plan with short-, mid-, and long-term goals.

By fostering better financial habits, you can improve your credit quicker and set yourself up for a financially sustainable lifestyle.

Get Professional Help

If you find that the credit repair process is too overwhelming or you simply don’t have the time to give it the proper attention, you can hire a credit repair company to help you. This gives you access to professional knowledge and experience that will often simplify the repair process.

If you do opt for a credit repair company, though, make sure to choose a legitimate option that has a proven track record of delivering real results. The last thing you want to do when your credit is already damaged is fall prey to a shallow promise of a quick-fix solution.

Take Your Time

Finally, remember to pace yourself as you set about your credit repair activities. You may be able to resolve the situation regarding your repo, and you may even be able to get the derogatory mark removed from your credit report.

However, your efforts may not be as fruitful. If that’s the case, you’ll have to focus on repairing your credit in other ways and simply wait for the repo to fall off your report seven years from now.

Fortunately, if the rest of your finances are in good order, the impact of the repossession on your credit will begin to fade well before the seven years are up and it’s removed entirely.

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