Repossessions are a negative thing that can damage your credit score reported on your credit report. Repossessions take account of the seizure of any properties attributable to payments that are late or overdue. If your credit report lists a repossession, there is still a way to restore your credit and eventually erase the listing from your credit report.
Can Repossessions Be Removed From a Credit Report?
In certain cases, repossessions may be withdrawn from your credit report, especially if they are inaccurate or unreasonable. To try to delete one, there are a couple of things you can do:
- Negotiate with your lender when they are repossessed, your lender loses money. And if you pay less than what you owe, paying off your loan is cheaper and more convenient for them.
To see if you can settle your debt and delete it from your credit records, you can try renegotiating with them. Make sure you have it in writing if they agree to this, and that you follow through with the terms you and your lender agreed to.
- File a dispute: You will dispute it with the credit bureaus if you go through your credit reports and find something reported inaccurately about your repossession.
The credit bureaus must inquire if you do this, and will ask the creditor to check the facts concerning your repossession. If the lender does not claim that the debt is correct, fair or substantiated, the repossession from your credit records can be withdrawn by the credit bureaus.
If they have already repossessed your house, your time to negotiate with your lender can be short or already closed. In this case, the choice to consider is to file a dispute.
How Can I Dispute a Repossession From My Credit Report?
You’ll need to initiate a credit claim to try to delete a repossession from your credit report and prove to the credit bureaus that the repossession is fraudulent, outdated or otherwise inaccurate. You can take a few steps here:
- Check your credit report and the information mentioned is checked. You are entitled every year from the Annual Credit Report to one free credit report from each of the credit bureaus.
- Take note of any mistakes relevant to your credit report. These include incorrect dates, amounts misreported and more.
- Gather proof which supports your arguments. Evidence requires proof of your identity, inaccurate account data, and records showing the information to be false.
- Notify the credit bureau of the mistake. Within 30 days, they have to investigate the conflict and report the findings back to you afterwards.
- The credit bureaus are allowed to delete the account from your credit report if the lender is unable to provide evidence or otherwise substantiate the facts.
- The account would not be withdrawn if the lender is able to show that the account is fairly and accurately recorded.
How Long Do Repossessions Stay on My Credit Report?
For up to seven years, a repossession will linger on your credit report, making it harder for you to apply for other loans.
Repossessions have a significant negative effect on your reputation and may show lenders that the property you buy will not be able to make payments.
How Do Repossessions Affect My Credit Score?
You may expect your credit score to decrease when you have a repossession on your credit report, but the exact sum is based on your credit situation. Here are several ways your credit may be impacted by repossessions:
Late payments: things may be repossessed because many payments have been skipped by you. That’s what your credit report would say, which lowers your credit score.
Repossession: The lender typically reports it to the credit bureaus after anything has been repossessed and it can appear on the record for potential lenders to see.
Collections: Even after the lender has resold the vehicle, if you still owe money, they may decide to hand over your account to a collection agency. On your credit report, the collection account can appear and lower your score.
All this shows other lenders that you can’t be trusted to pay back what you owe and, as a result, new loan applications are less likely to be accepted. A repossession may lead to many negative items on your credit report, which will affect your credit score, in addition to losing your home.
Why Do Repossessions Happen?
Repossessions take place when a credit-bought asset is behind on payments, usually for three months or more. If a lender suspects that the owner will not keep up on payments, they will opt to repossess the house.
For car loans, repossessions are most common, but they can extend to any loan that requires collateral, such as purchasing furniture from a furniture store on credit.
How Do Voluntary Repossessions Affect My Credit?
A voluntary repossession, often referred to in the case of a car as an automobile surrender, is when a borrower can no longer afford payments on the property they have purchased and gives it back to the lender on a voluntary basis. There is a common misconception that the credit is better for a voluntary repossession than a forced repossession. They’re really close in financial and credit terms.
If you ask the lender willingly to come and pick up their property or you are forcefully repossessed, the message is the same: you do not pay your debt and your property is taken back by the lender.
One advantage of surrendering your property willingly is that it is less emotionally exhausting and humiliating than getting a forcible repossession, which can occur anytime and anywhere. Repossessing your property willingly gives you a little more flexibility and typically ends up costing less.
Do You Still Owe After a Repossession?
Yes, a lender will come after you, known as a “deficiency balance,” for money owing on the vehicle.
Once the collateral is repossessed by a borrower, they typically attempt to resell it to recover their capital. The lender would not recoup the full value of the loan on items that depreciate over time, such as cars, because the vehicle is worth less than when the buyer first bought it.
When a lender buys items for less than what is due, for the difference, they will come after the buyer.
Can I Get a Loan After a Repossession?
The brief response is yes. After a repossession, you can still get a loan. There are very few lenders, however, who are willing to take a chance on anyone on their credit report with poor credit or derogatory marks. Those who are willing can require higher interest rates and fees to be charged by you.
There are respectable lenders out there, however, who have admitted applications with repossessions on them. You should find someone with good credit to co-sign the loan for you, for better chances of approval and better interest rates.
To make yourself a stronger applicant, you should also work to strengthen your credit and payment background.
How to Prevent a Repossession
At some stage, many people go through financial troubles. You can communicate this with your lender and see how you should adjust your payment schedule if you are struggling to keep on top of your payments.
For car loans, you can speak to your lender and see if they’ll let you miss payments for a month or two if you know your financial hardships are going to be temporary. Without penalizing you, some auto lenders allow this, but you need to interact with them or else you will be penalized. Working with your creditor will avoid a repossession from happening and allow you to retain the house.
How Can I Improve My Credit After a Repossession?
If you get approved after a repossession for a loan or a new line of credit, making payments on time will help you build up your credit backup.
If the repossession is in question and you can’t have it reversed, then you need to give it some time. Eventually, your credit score will increase and the repossession will come from your credit reports. You can, however, see your score increase when you open new accounts and make on-time payments.
Lexington Law Firm will support you with our suite of credit restoration services if you’re dealing with a poor credit score or other derogatory things on your credit reports. Our team of consumer advocates has been helping consumers work for over a decade to challenge unequal, misleading and unsubstantiated negative facts. Contact us today for a consultation on a free, personalized credit report.