How Long Does A Repo Stay On Credit Report?

Possibly, nothing is as devastating as having your car repossessed or a repo, on your credit report. It means that you were unable to make payments on the car loan and thus the car was repossessed by the lender. If you lose your assets, your credit score can drop by over 100 points and this affects the approval of other loans and credit lines.

A common concern that consumers have regarding repossessions is how long a repo stays on your credit report. The length of time that a repo is reported on your history is crucial when seeking to restore credit after this adverse event.

Duration for Which Repos Appear on Credit Reports?

A repo can remain on your credit report for up to 7 years from the date of the first missed payment that resulted in the repossession. Experian, TransUnion, and Equifax are among the leading consumer credit reporting companies that consider repossessions similar to other forms of delinquent payments or collections as far as reporting durations are concerned.

This is the maximum period allowed under the Fair Credit Reporting Act (FCRA) for these reports to be kept on file. The FCRA defines how long negative information can be reported by the credit reporting agency. But they do not remain reported for the 7 years in all cases despite the repo.

There are a few key factors that determine exactly how long your repossession sticks around.

• Date of first missed payment: This 7 years is measured from the time you failed to make the payment as agreed, not the time the car was repossessed. That is why if you paid your car for instance for 10 months then defaulted, the repo could reappear for almost 7 years plus the 10 months.
• State laws: Some states have shorter credit reporting time limits under state law than under federal law. For instance, in Wisconsin and Mississippi, credit bureaus are allowed to report repossessions only for 5 years from the time they became delinquent.
• Type of bankruptcy: However, if the repossession debt is filed under Chapter 13 bankruptcy, then this negative mark can be removed earlier. However, once the debt is paid through bankruptcy completion, the repo cannot legally be reported by the repo agencies.

All in all, the auto repossession is likely to be reported on your credit report for 5-7 years depending on the state of affairs and the time you missed your first car payment.

Does Paying a Repo Help Your Credit Faster?

One question that people ask is whether it can be deleted early if one pays for repossession after it has occurred. However, in as much as settling the balance owed or paying it does not affect the longevity of the record. Still, the lender can sell its account to another company, and even after paying, the delinquencies that caused the repossession remain on the credit report for up to 7 years.

On the bright side, making payments proves responsibility, and will not result in additional delayed payments. It also reduces how much the repossession impacts the credit utilization ratio once the balance on the collections account equals zero. Apart from that, it helps to keep the creditor from seeking other legal means to reclaim what is due to him/her from you. Thus, even though paying a repo will not remove it from the credit reports earlier, it is advisable to tackle this type of debt.

How Repos Harm Credit Histories?

It is therefore necessary to grasp the exact manner and reason through which repos lead to the kind of credit score damage in the first place. This can help you reverse some of the impacts through the other credit report activities as you wait for the 7 years.

Here are two key ways automobile repossessions lower your scores.

1. Late Payments: All the missed payments that happened before the repossession are recorded in the credit history. Many scoring models consider this payment history significantly. One late, one 30 days can make the drops in scores, not to mention 60, 90 days, or more. Before the repo, these amounts accumulated for months and only then could be considered as a payment for the goods.
2. Increased Credit Utilization: After a car has been repossessed, the lending company writes off the remaining balance on the loan and then transfers the ownership of the repo rights to a collection agency. This outstanding balance owed is considered as negative against the total credit balances on all your credit accounts therefore contributing to a high credit utilization ratio. In this context, the actual utilization ratios are inversely proportional to the scores, which means, the higher ratios of actual utilization are equal to the lower scores.

Typical Credit Score Impacts

Your credit scores will get a 50-100+ point deduction in the months following your repossession. In other words, one repo reduces credit ranges from Good to Poor even when there are no other negative credit histories.

The size of the negative effect is generally larger if your score was higher before defaulting on your car loan automatically. This is because individuals with good credit stand to lose a lot more than individuals with very bad credit who may already score extremely low.

The full 7 years of this type of negative item remain on your report, it will perpetuate constraining your credit standing from recovering to previous levels. It is only when the clock is ticking away at the end of the reporting period that your scores can inch up and then show that you are a good financial citizen again.

How to Rebuild Credit?

It may sound very easy to wait patiently for a repossession to drop off your reports. However, being able to sit on the card for up to 7 years is unproductive and expensive if you need credit.

The good news is there are proactive steps you can take to offset some of the credit score damage of a repo - both while it still shows up and once it disappears in the rearview mirror.

• Pay down other debts: Credit card and installment loan balances can be reduced as a way of mitigating the effects of a repo on utilization. If it is possible to have zero balance in all accounts the best is fine.
• Become an authorized user: Having a long-open credit account opened in their name by a spouse or other family member makes them an authorized user, which creates a positive history.
• Open secured card: Secured credit cards come with a cash deposit that you use as collateral for the value of the line of credit. They let you reinstate a recent positive payment history.
• Focus on on-time payments: Consequently, going forward, pay all the bills on or before their due dates as if it is a dog with a bone. The current credit score shows that the bad behavior of the past is overcome by good behavior.
• Limit credit applications: It initiates a hard credit check and increases credit pursuit red flags with each application. Limit spending to preapprovals or important requirements for the next 3 years.
• Monitor credit reports: One should pay attention and check all 3 bureau reports at least once a year for errors that can aggravate the score ill effects. It is also important to dispute any inaccuracy that is observed with the bureaus.
• Give it time: Though patience might prove to be a virtue, let the 7 years run their full course to effectively rebuild credit scores. This means that positive actions that were taken during this period will start paying off in rebuilding the dividends in the future.

The End Game

Finally, whether it remains on the report for three months or a day matters the least in the end. Seven years is a very long time, but from the world’s perspective, everything is passing by in the blink of an eye. Maintain a vigorous effort in fixing credit reputation during the transitional period.

And when the repossession is ultimately removed from your record at some point in the future, you’ll be back on the right track or hopefully in an even better position than before the destructive event took place. It is essential to look forward instead of backward when it comes to credit.

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