How Long Does A Repo Stay On Your Credit? Impact On Credit

When you stop paying the loan, the lender takes back your car, which is called repo or repossession. So, the question to worry about is, how long does a repo stay on your credit, and how does it impact your credit score? It can feel scary, but you are not alone. In this guide, I will give you an in-depth guide about the time duration repossession stays on your credit file or report.

Table of contents

• When and Why Repossession Happens
• How Long Does a Repo Stay on Your Credit Report or File?
• How Does a Repo Affect Your Credit Report?
• Can You Remove a Repo From Your Credit Report Early?
• What Happens If You Still Owe Money After a Repo?
• How to Rebuild Credit After the Repo Stays on Your Credit Report
• Conclusion
• FAQs

When and Why Repossession Happens

The repossession triggers when the borrower stops making payments due to financial or other issues. The situation when someone is unable to pay the loan amount is called defaulting on a loan. There are some legal car repossession loopholes that can stop repos, but it can still leave a bad impact on a credit report.

Before the repossession process, the lender sends notices or tries to contact you first. But if you keep missing payments and do not respond, they can start the repo process. It is legal for the lender to take the car back if the borrower fails to make timely payments.

How Soon Can a Lender Repossess a Car?

The repossession usually happens quickly in many US states. In most cases, the lender repossesses the car just after you miss the first payment. There are a few states that give you more time before repossessing the car and give you initial notice first. Therefore, always carefully read the contract so that you are aware of what will happen when you miss the payment.

Laws About Repossession: What You Should Know

The repossession laws are different for lenders in each state, but in most cases, they are allowed to instantly take back the car. Lenders are allowed to come and tow your car without giving you any warning. However, there are certain rules that lenders must follow. For example, they cannot break into a locked garage, threaten you, or use physical force. Once your car is repossessed, the question arises: how long does a repo stay on your credit? I am explaining this in detail below.

How Long Does a Repo Stay on Your Credit Report or File?

A repo stays on your credit for 7 years. Please remember that the time will start from the day you missed the first payment. The repo effect on your credit will start from the first missed payment date, not from the day your car was repossessed.

Does Voluntary Repossession Stay for a Shorter Time on Your Credit File?

No, the duration of the repo stay is the same, no matter if you gave the item back yourself or they took it. Once the 7 years are up, credit bureaus will remove the repo from your report automatically. In short, you do not have to do anything after the repossession, and it will disappear from your credit automatically.

How Does a Repo Affect Your Credit Report?

The repo is considered a derogatory mark on your credit report. It is a very negative mark, which shows other lenders you did not pay back a loan as promised in the past. Just like a bad grade on a school report card, a repo on your credit report leaves a bad impression. The repo stays on your credit for 7 years and makes it harder for you to get loans, credit cards, or even rent an apartment.

How Much Can a Repo Lower Your Score?

The repo stays on your credit and drops your credit score by 100 points or even more. If you had a good credit score before the repo, the drop could be bigger. If your score was already low, the drop might not seem as huge, but it still hurts. However, there are some ways to fix a credit score after car repossession that help you recover the damage to your credit history.

Additional Hits of a Repo Stay on Your Credit: Late Payments, Defaults & Collections

You will also experience some other negative marks before the repo stays on your credit report. Here is the list of some of these negative marks:

1. Late Payments: These show that you did not pay your loan on time.
2. Loan Default: This means you stopped paying altogether, and the lender decided you broke the loan agreement.
3. Collection Account: If you still owe money after your car is repossessed and sold, the lender might send the leftover debt to a collection agency. That gets reported as another bad mark.

So, the repossession stays and leaves multiple negative marks on your credit report. Therefore, stopping the repossession is necessary if possible because all these negative points can badly affect your credit.

Can You Remove a Repo From Your Credit Report Early?

You can remove a repo from a credit file, but it is very hard and challenging. You can only ask for the fixture or removal of a car repossession from credit if you find mistakes in the repo listing.

How to Dispute an Inaccurate Repo

You can write a letter or file a dispute online with credit bureaus like Experian, TransUnion, or Equifax. If they successfully find the mistakes, they will fix or remove the repo. You can also try writing a goodwill letter to the lender and ask to remove the repo from your credit file. However, the goodwill letter will work only if you have already paid what you owed.

Rest assured that the illegal or wrongful repossession should not stay on your credit report. If you find that the repo is not legal, you can talk to a lawyer and file a case.

What Happens If You Still Owe Money After a Repo?

If you still owe some money after a repo, you will have to pay the leftover money, which is called the deficiency balance. The lenders have the right to take you to court and file a case to get back the leftover money. They can also sell the leftover debt to a collection agency. After that, the agency will try to collect the money from the borrower and may report it to credit bureaus.

How to Rebuild Credit After the Repo Stays on Your Credit Report

After the repossession of your car, the bad impact stays on your credit file. However, you can have a chance to rebuild your credit with the following techniques:

1. Start fresh and pay all your bills on time. Remember that even small bills help rebuild your score.
2. Try to use less than 30% of your credit limit. For example, if your card limit is $1000, try to use less than $300.
3. Use a secured credit card or credit builder loan because they really help people with low credit scores.
4. Ask someone you trust to add you to their credit card as an authorized user. So, if that person makes a payment on time, it will also positively impact your credit report.
5. Finally, keep checking your credit score at least twice a year and take quick action if you find anything wrong.

Conclusion

In short, car repossession hurts your credit score, but it does not last long. After 7 years, the repo will automatically be removed from your credit report. You can fix your credit with some smart moves like paying bills on time and spending only what you can afford.