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How long does a car repo stay on your credit report?
All repossessions, including car repossessions, remain on your credit report for seven years, starting from the date of your first missed payment.1 A vehicle repossession will show up as a negative entry on your credit report and bring down your credit score, though it will gradually recover over time.
How does a repossession work on car loans?
When you take out a car loan or a loan for another vehicle, your lender technically owns your car until you’ve paid off the loan in full.
In other words, auto loans are a type of secured loan in which your car serves as collateral. This means that if you fall behind on your payments, your lender has the right to repossess your vehicle.
How long does a car repossession take?
How long a repossession will take depends on the laws in your state and your lender’s policies. In most cases, your lender can start the repossession process as soon as you’re in default on your payments (your loan contract will state what counts as a default).2 However, the process doesn’t usually begin until you’re at least 10 days late on a payment.3
Most lenders start with charging late fees and trying to collect payments from you before resorting to repossession, but whether they wait or immediately begin the repossession process is ultimately up to them.
It’s a good idea to talk to your lender if you think they’ll start taking steps to repossess your car. Repossessions can be either voluntary or involuntary, and voluntary repossession is usually the best approach when you know you won’t be able to make your payments.
A voluntary surrender will still show up on your credit report for seven years, but potential lenders may treat it more positively than an involuntary repossession.3 They may interpret a voluntary surrender as evidence that you took responsibility for your debt and communicated with your lender to settle it on your own.
Can you get your car back after repossession?
There are three ways you might be able to reclaim your car after a repossession, but each has its own difficulties and may depend on your loan contract and state’s laws:4
- Reinstating the loan: This means bringing your account current by paying the sum of your missed payments as well as all repossession-related costs.
- Paying off the loan: You’ll need to not only fulfill your missed payments but also redeem your loan by paying it back completely.
- Buying the car back at an auction: Regardless of what state you live in, if your lender decides to sell your car in a public auction, then they’re required to notify you of when and where the auction will be held so that you have the chance to buy back your car. 4
How does a repo affect your credit?
Repossessions can seriously damage your credit score, and according to the terms of the Fair Credit Reporting Act (FCRA), they will remain on your credit report for seven years. There are also other negative entries that can appear on your credit report leading up to or following a repossession that can cause a drop in your credit score:
- Late payments: Because your payment history makes up 35% of your FICO score, missed payments can do major damage to your credit. Each of your missed payments will appear on your credit report.
- Defaults: Defaulting on a loan means that you’ve stopped making payments. Generally, a default is worse for your credit than a late payment.
- Collections: If you can’t pay back your debt, your account may be sent to a debt collection agency, which will be very harmful to your credit score.
- Court judgments: If your lender can’t collect on your debt, then they may take you to court. Although judgments don’t appear on your credit report (and consequently don’t affect your score), lenders can still take them into account when deciding whether to give you a loan.5
All of these entries on your credit report will make future lenders and creditors reluctant to lend to you, which will make rebuilding your credit difficult.
How much does a repossession hurt your credit?
It’s impossible to say exactly how much a repossession will damage your credit because credit scoring is highly dependent on your individual credit history. FICO and VantageScore, the two main scoring models, also differ slightly in how they treat certain items on your credit report.
In general, repossessions can significantly hurt your score, as can the other negative marks that are often associated with them.
How to remove a repossession from your credit report
If you can’t wait seven years until the repossession falls off your credit report on its own, then there are a couple of approaches you can try, depending on your situation.
Unfortunately, it’s not as simple as just making up all your late payments. You’ll need to get in touch with your lender and the credit bureaus that are reporting your repossession.
Negotiate with your lender
If you’ve defaulted on loan payments and your property has been repossessed, then your best chance of getting the repo off your credit report is reaching out to your lender and seeing whether they’re willing to make a deal with you. There are a couple of different arrangements that they may be willing to accommodate:
- Loan reinstatement: If your loan contract allows for reinstatement, then you may be able to reinstate the loan and get the repossession removed from your credit report. This will involve paying one lump sum that covers all of your overdue fees and repo expenses.
- Pay for delete: In some cases, your lender may be willing to convince the credit bureaus to delete a repossession from your credit report in exchange for payment. This tactic is commonly referred to as pay for delete.
File a dispute
You can dispute a repossession on your credit report if it’s for an account that’s not yours or if any of the account details are incorrect. Make sure to check for errors in all of your credit reports from the top three credit bureaus (Experian, Equifax, and TransUnion), which you can get from AnnualCreditReport.com.
When you initiate a dispute, the credit bureaus will conduct an investigation into the circumstances of your repossession. You’ll need to provide proof that the repossession isn’t yours or shouldn’t be on your credit report.
How can I fix my credit after a repossession?
Although repossessions can do a lot of damage to your credit score, there are several things you can do to start fixing your credit:
- Bring your accounts current: Paying off all of your outstanding debt to bring your accounts current will have a major positive influence on your credit and will make it easier for you to avoid falling behind on your payments in the future. (There are some odd things that happen to your score when you pay off your credit card debt in full, but they’re overall positive.)
- Pay your bills on time: Making sure that you always pay your bills on time going forward will improve your credit score by reducing the number of delinquent accounts you have.
- Keep your credit utilization rate low: Try to use as little of your available credit as possible (less than 30%, and under 10% if you can help it). Your credit utilization rate is the second most important factor influencing your credit score, so improving it can help to counter the negative effects of a repossession.
- Add a cosigner to new loans: Adding a cosigner with a good credit score to your loans will reassure your lender that you’ll make your payments on time, and it may also help you to get better rates that make it easier to stay on top of your payments.
- Monitor your credit reports: Checking your credit report can help you ensure that credit reporting errors don’t bring down your credit score. It’ll also help you track your progress over time and identify areas for improvement.
If you filed a credit dispute over the repossession and it wasn’t removed from your credit report, then you have the right to add a brief “consumer statement” to your credit report explaining your situation (i.e., that you maintain the item is invalid). 6
However, creditors won’t always see the statement, and if they do, it might actually work against you by alerting them to the repossession, which they otherwise might have ignored. Carefully weigh the pros and cons before leaving your statement.
Will paying off a repo help my credit?
Paying off your “deficiency” after a repossession (the difference between the amount you borrowed and the money your lender was able to get from selling the item) might improve your credit score by reducing the amount of debt you owe.
Whether it improves your score or not, paying off the repossession is always a good idea because otherwise, you might end up being sued by your lender.2 The total impact it’ll have on your score will depend on your credit history and overall credit profile.
Once you pay back your debt in full, check with your lender to ensure that your account has been reported to the credit bureaus as fully paid off. There’s also a small chance that your lender will have the account removed from your credit report once you’ve paid it off, which will immediately improve your credit score. You can try to negotiate with them to get them to do this (a strategy known as negotiating pay for delete), although there’s no guarantee you’ll be successful.
Can I still get a loan after a repossession?
You can still get a loan after a repossession, but it’ll be difficult until the repo has come off your credit report. If a lender does agree to issue you a loan, expect them to charge you relatively high interest rates and fees.
Lenders do this to compensate for the extra risk they’re taking in extending your credit when you have a bad credit score or a derogatory mark like a repossession in your credit history.
Loans you can qualify for with a repo on your credit report
If you’re specifically looking for a loan to replace a repossessed car, there are a number of bad-credit auto loans that you may still be able to qualify for:
If you’re looking for a general-purpose loan, you can also review our list of personal loans for people with bad credit. Again, pay attention to your loan’s interest rate and make sure you can afford it before you apply.
How to avoid a repossession
Avoiding repossessions is as simple as making loan payments on time. You should be honest with your lender if you’re having a hard time making payments—most lenders would much rather work with you to establish a repayment plan that you can stick to than invest the time, money, and resources required for repossession.
