How to Remove Repossession from Your Credit Report
Having a piece of your property repossessed can be crippling. What many victims of repossession don’t immediately realize is that it leaves a negative mark on your credit report. This can lead to problems acquiring a loan, moving into a new apartment, or even getting a job. You obviously want to limit this as much as possible, so how do you remove a repossession from your credit report?
Table of Contents
- 1 What is a Repossession?
- 2 Removing a Repossession From Your Credit Report
- 3 Get Professional Help to Rebuild Your Credit
What is a Repossession?
Repossessions occur when the true owner of a piece of property reclaims it from the borrower. Vehicle repossession is perhaps the most well-known, and that can have obvious detrimental effects to their professional and personal lives. However, repossessions can happen with any borrowed item that still has value— even a home.
When Does a Repossession Happen?
A repossession usually occurs when a borrower has failed to meet the terms of the loan. This usually means that you’ve failed to pay your bill on time. Since it’s pretty expensive for an owner (usually called a lienholder in these cases), they don’t generally repossess the item unless you’ve missed several payments.
What Happens When a Car is Repossessed?
This can be the most immediately concerning repossession. First of all, lien holders do not have to go to court to repossess the property, so you might have little notice when they come and take your car away.
They will likely tow your car and sell it to a third party at an auction to be paid against your existing loan. If there is still a balance afterwards, your lienholder can still hold you responsible for that remaining balance. Regardless, the repossession (or “repo”) will be reported to the credit bureaus.
How Do You Get a Car Back After Repossession?
Since many people rely on their car as their main method of transportation to and from work, an auto repossession can be particularly debilitating. Your lender is required to give you a reasonable amount of time to act, although each state has a different definition of “reasonable.”
If you want to get your car back, your options are either to buy the car back when the lender attempts to sell it at auction, or to negotiate with your lender. You might need to reinstate the loan or change the terms, but that’s you only hope to get your car back.
How Does a Repossession Affect Credit?
Considering that repossession only happens after you’ve missed several payments, it can be quite damaging. The repossession itself will take a big bite out of your score, but you likely didn’t have great credit to begin with if you’re in this spot.
Furthermore, that might not be the end of it. If you still have a balance after the lender sells the car, and you’re unable to pay that as well, then you’ll end up with more judgements on your credit report.
How Long Does a Repossession Stay On Your Credit Report?
Unless you take action to remove it, a repossession will stay on your credit report for seven years. While the negative impact will decrease over time, it will still be a heavy weight dragging your credit score down during that time.
Removing a Repossession From Your Credit Report
If you don’t feel like waiting seven years— probably a wise choice, considering that it could prevent you from achieving your financial goals— then your only option is to remove it from your credit report entirely. Be prepared for an uphill battle. Credit repair can get complicated quickly.
Negotiate New Payments With Your Lender
The first thing you need to do is see if you can reach a new agreement with your lender about any remaining balance. You don’t want any residual debt to drag you even further down.
If you can accomplish that, see if you can renegotiate the original loan as well. Your lender is probably selling the repossessed property at a loss, so if you can pay the original loan, that is better for them in the long term. Identify why you couldn’t pay your original loan, and make every reasonable attempt to show that you can pay these new terms now.
Use Loan Rehabilitation to Reinstate Your Loan
A loan rehabilitation program will probably be what your lender suggests, if they are open to reinstating the loan. In loan rehabilitation, you and your lender come to an agreement about your payments over a relatively brief period of time (usually less than a year) in order to get your account current. You might be able to miss an occasional payment, as long as by the end you have met the balance. Be sure to go over the specifics with your lender.
Consult an Attorney
However, if you don’t trust your lender, you might want to consider hiring an attorney to advocate for you. An attorney will have a better understanding of the the laws surrounding repossession, loans, and credit repair. Nothing can beat having an expert opinion on your side.
Dispute the Repossession With the Credit Bureaus
If you want to remove the repossession from your credit report, you’ll have to dispute it with the credit bureaus. You’ll submit your complaint and request to have it removed from your credit report, along with your justification. However, a simple “it is dragging down my credit” isn’t enough. Unfortunately, the process for getting anything removed from your credit report is far from simple.
Get Professional Help to Rebuild Your Credit
While this is technically a process that you can do yourself, credit repair experts and lawyers are often better equipped to handle this situation. There are three main credit bureaus, and you’ll have to navigate the bureaucracy with all of them. This can take a lot of time and effort. Chances are that if you’re credit is falling because of repossession, you already have a lot to deal with, and true credit repair takes months of concentrated effort.
Additionally, professionals know the industry; they’ll be better off in negotiating and navigating the system. If you’re serious about improving your credit, you might be better off going with a professional.
A repossession can turn your life upside down, but there’s no reason it has to stay that way. You can right the situation and move on with your life. You’ll have to deal with the short and long term consequences, and you might need some professional help. But hopefully you’ll be able to put this all behind you sooner rather than later.
For more information on credit scores and what else affects them, visit our credit score resource center. For more letter templates, including how to dispute inaccurate entries on your credit report, visit our letter template resource center.
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Dayton is a chronic Wikipedia addict, which is detrimental to her social life but stellar for her writing. She resides in Boise, ID, surrounded by her own frantic outlines, highlighted encyclopedias, and potatoes. The latter was not by choice.
This post was updated May 8, 2018. It was originally published April 5, 2018.