How Will A Car Repossession Affect Your Credit Score?

Credit Repair, Debt and Collections

how will a car repossession affect your credit score

How will a car repossession affect your credit score? If you are currently asking yourself this, you’re probably in some sort of credit rut. A car repo is never a fun situation—but the following information can help you get back on your feet, credit-wise, following an event of this nature.

How Will A Car Repossession Affect Your Credit Score?

A vehicle repossession will be removed from your credit report 7 years from the delinquency date of the original auto loan. It could carry quite a negative impact on your credit score, even just during that time.

What does a repossession entail?

Laws and procedures regarding car repossessions vary from state to state, so be sure to check your local resources. In general, however, a bank or lender can repossess your vehicle if you find yourself behind on bill payments. Lenders may also need to provide a final notice and a chance for you to make up for missed payments before repossessing your car.

If you fail to pay off the outstanding debt ASAP, you could lose your vehicle in a sale or auction. The lender or bank may also take you to court and obtain a judgment against you. This could potentially be reported as public record info on your own credit report—and further affect your credit negatively.

If your car is sold for less than the amount you owe, you may still be responsible for paying the difference. This debt can possibly remain on your credit report until it is paid off, and after you pay it fully, credit bureaus usually keep reporting the repossession on your credit report for seven years from the date of the original delinquency.

how will a car repossession affect your credit score

Building Credit Again, Post-Repossession

A repossession can compromise your chances of getting good rates and even approval on future loans and credit. Following a vehicle repossession, the best move to benefit your credit is to pay off the outstanding debt ASAP. Talk to your lender about a debt settlement or a repayment plan. You might also request that the lender/bureaus classify the loan as “resolved” so it can be deemed “Paid in Full” or “Satisfied” on your credit report. This alone may lessen the effects of the car repossession.

Furthermore, you should practice positive credit habits after a repossession. Consistently pay your bills on time, use less than 30 percent of your credit utilization ratio, for starters. For more credit repair help, contact Go Clean Credit.

In all, a car repossession could end in a 100-point drop in your credit score. It also signals a major red flag for auto lenders that could likely prevent you from financing another vehicle.

What about voluntary repossession?

How will a car repossession affect your credit score, even if you voluntarily surrender your vehicle? If your creditor won’t accept a late payment and insists on a car repossession, you may convince him or her to settle (reduce) your debt in exchange for a voluntary repossession. However, you’ll still be required to pay off the remaining balance after the creditor sells the car and applies the sale proceeds to the loan, voluntary or otherwise. What’s more, volunteering to surrender your vehicle will not necessarily hinder a creditor from making note of it on your credit report.

A voluntary repossession is slightly more preferable to involuntary repossession because it demonstrates the willingness to work in tandem with creditors. It can also keep you from having your car repossessed in front of your family, which can be an emotional detriment.

Unfortunately, however, the difference to your score is minimal; from a lender’s perspective, the bottom line is the same. A repossession is a repossession, and a voluntary repossession should be a last resort.

Are you still asking yourself, “How will a car repossession affect your credit score?” Contact Go Clean Credit for all your credit repair needs.

No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a one size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.

We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.

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