How Long Does A Car Repo Stay On Credit?

How Many Years Does A Car Repo Stay On Your Credit Report?

One of the most taxing and difficult things any individual might have to deal with is having their automobile repossessed. Along with losing your car, your credit score suffers and it stays on record for many years. Complications in credit card, loan, apartment, and other service acquisition follow from this. How long then do auto repossessions show on the report?

The period When Car Repo Happens in Credit Reports

A car repo can remain on your credit report for up to 7 years starting from the time it was first considered delinquent. It is common practice for most auto lenders to forward the repo to the three leading consumer credit reporting agencies, namely Equifax, Experian, and TransUnion. This means that it will be in the credit report each bureau prepares for you.

The date that the auto loan ceased to be considerably less in amount than it was previously is called the first delinquency date. It is usually 120 days from the initial date of missing a payment, which is the first delinquency date. So if you did not make 3-4 monthly payments before the car was repossessed, the delinquency period starts from the first missed payment. It is calculated from this delinquency date and not the actual repossession date though the 7-year period applies here.

However, what you need to understand is that even after 7 years, the repo can stay on your credit history if the auto lender continues reporting it as unpaid. Adverse information can be reported by credit bureaus for as long as the debt remains unpaid legally. However, they affect your credit score in the short run and the effects will start to reduce after some time.

How Repossession Affects Your Credit Rating?

Sometimes, having a car repossessed can drop your credit rating and this is very bad. It pretty much tells other creditors that you are a bad credit risk and can hardly meet the payments on large obligations. In a recent report by FICO, it was stated that one can lose up to 160 points on his or her credit score through car repo.

The degree of delinquency determines the extent of the credit score drop; the more severe it is, the worse the consequences. For instance, if one failed to make payments for half a year and the car was just recently repossessed, it is more severe than in the case when the payments on the car were missed once or twice.

Further, it was also evident that the repo as recent as possible has a greater influence on credit scores. It is worse to have a car repo in the past one year rather than 3-4 years ago. This is because creditors want to see current creditworthiness when they are going through the credit report.

Tips on rebuilding credit after a vehicle repossession

The best thing is, that you can begin credit repair straight away because you do not have to wait seven years for the repossession to fade. Here are some tips that can help.

• Paying off all other open accounts on time - This also means you are trying to pay your bills appropriately.
• Limit the use of credit cards - credit is also damaged by high balances on credit cards.
• Wait 6-12 months and consider adding a new credit account - Timely payments demonstrate a good credit history. It is always advisable to start with a retail card and then progress to the other higher card ratings.
• Sign up for credit reporting – it allows you to observe changes in your score and understand the beneficial effects of proper behavior.
• Obtain factual records inserted into your credit report – One can explain the circumstances that led to the repo.
• Avoid high fees and penalties- Be wary of lenders who offer to help fix credit through new high-rate accounts.
• Look into credit counseling agencies – You can find non-profit organizations that will assist you in formulating the recovery plan.

If you pay the amount and are committed enough, you can always get your previously good credit back. However, it does take time for this effect resulting from the repossession to wear off fully. For a better future, be consistent and accountable for all financial accounts.

How Repossession Works?

Having a general knowledge of how repossessions work can save one from being subjected to this process again. Below are some key aspects of how repossession works.

Foreclosure begins at a time when you have not paid your auto loan for 120 days or more. This default grants the lending agency the legal power to repossess the financed asset, in this case, a vehicle.

If voluntary payment agreements cannot be reached, the lender takes the vehicle to a recovery company to be collected from your home or other place. This can happen without prior notice.

The repossession company sells the car very fast and most of the cars are sold within 1-2 weeks. They are private and intended for selling the car directly to dealers in the auto business.

In the end, once the car is sold via the auction, you will be given a notice of any balance owed. This is referred to as the “deficiency balance” in case the sale of the vehicle yielded less than the amount owed to the lender.

This balance can be recovered through collection procedures and legal actions by the lender such as engaging a collection agency or proceeding to sue you. They can seek to garnish wages if they are given an order by the court.

Just like it is with any other credit, a car repossession leaves a permanent blot on the credit report. However, if you work towards it and strike a deal on the management of your accounts, you can reverse the trend. Just ensure that you have never ignored payment issues so that it does not repeat itself in the future.

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