Having a repossession on your credit reports greatly hurts your credit score. Thus, it’s worth trying to learn how to remove a repossession from your credit report.
Often, repossessions come with extra consequences such as late payments or collection accounts. As a result, a single repossession can deduct many points from your credit score and make you appear less trustworthy.
What is A Repossession & How Can It Happen?
When you sign for a loan (e.g. an auto loan), you’ll probably commit to:
- Pay back the loan
- If you stop making payments, the lender has the right to take and sell the car
- If the automobile’s price is not enough to pay off the balance, you still owe the amount left
Actually, you sign that the lender owns the property until you fully pay your debt. If you stop paying, the lender can sell the property. This process is called repossession and is a result of not making your payments.
A repossession can happen in two ways:
- You voluntarily agree to return the property to your lender
- Your lender sends an agent to reclaim the car, with or without notice
Of course, there are different rules in every state or country, but the process doesn’t differ a lot.
Is It Possible to Remove a Repossession from Your Credit Report?
Yes, but can you really remove a repossession from your credit report even if you’re totally responsible for it?
Yes, it’s possible to remove it but it’s not guaranteed. There are three different options to remove a repossession from your credit report:
- Wait seven years until it falls off naturally. You’re not supposed to be able to remove negative inquiries like a repossession, but if you want to improve your credit score faster you have to try other methods.
- Hire a professional to handle it for you. It can be a credit repair company or an attorney that specializes in credit repair. It will cost you some money though. On the other side, you’ll save a lot of time and the chances of success are higher because they have experience in handling situations like these.
- Dispute the repossession on your own. This way, you won’t need to spend money. Of course, you’ll need to spend some time to read, understand, and carefully follow this process. In this post, we’ll focus on this method.
How To Remove A Repossession from Your Credit Report on Your Own
Negotiate With Your Lender
First of all, you can try to pay the remaining balance even after the repossession happened. You can contact your creditors and tell them you’re willing to pay off your debt if they’ll remove the negative inquiry from your credit report. This is called the pay for delete method.
Lenders don’t want to lose their money, so they often accept to discuss your situation. If you can’t afford it and that’s the reason you stopped making payments in the first place, you should try disputing the repossession.
How to Dispute a Repossession from Your Credit Report
Using this method, you’ll try to dispute the repossession with the three major credit reporting bureaus.
Check carefully your credit reports for any possible inaccurate information related to the repossession. These inaccurate details can include:
- Payment terms
- Account Numbers
If you find any errors, dispute a file by sending a letter to the three bureaus:
Even if you can’t find any errors, you can try to send a letter asking them how the repossession is verified. Avoid using an online platform for disputing such items, because you make it easier for them to deny your request.
According to the Fair Credit Report Act (FCRA), they are obligated to respond within 30 days once they receive the message.
They have to answer you why they can’t remove the repossession or remove the negative inquiry from your credit report.
Even if they don’t accept your request, they’ll probably let you know the lender’s details that reported the repossession on the three credit reporting bureaus.
Dispute the Repossession with Your Lenders
Now you know who reported the repossession, it’s time to dispute the negative entry with your lender.
Send them a letter and kindly ask for evidence of how the repossession is verified. Sometimes, companies are too busy to invest time in such requests, so they prefer to ignore them.
If you’re lucky enough and they do ignore the request, they will delete the repossession from your credit report but no one can guarantee that.
If your lenders or the credit reporting bureaus don’t respond within 30 days, you should contact the Federal Trade Commission (FTC).
It’s recommended to you use certified mail, so you can get a notification the moment they deliver your letter. For more details and letter templates, make sure to check our free “DIY Credit Repair Guide”.
How To Remove A Repossession from Your Credit Report – Summary
A repossession has devastating effects on your credit score, so you may want to remove it as soon as possible. Instead of waiting seven years for the repossession to fall off naturally, you have some other options too.
If you can afford it, you can make a deal with your lender to remove the negative inquiries from your credit report as soon as you pay back your debt. Otherwise, you can hire a credit repair professional to handle the situation for you.
In case you don’t want to spend money on credit repair companies, you can try to initiate the process on your own. No method can guarantee results, but it probably worth the effort!
How To Remove A Repossession from Your Credit Report – FAQs
How bad is a repossession for your credit score?
A repossession can deduct about 100 or more points from your credit score. This is because a repossession comes with late payments and maybe collection accounts.
Payment history is the most important ranking factor. In order for a repossession to happen, you need to miss at least three or four payments. Thus, these late payments deduct points as well.
Also, if your account turned into a collection account, the same debt may appear twice on your credit report if it has been sold to other collection agencies. However, you have the right to dispute it.
How long does a repossession affect your credit score?
It will appear on your credit reports for seven years. As time passes, it becomes less powerful though.
This way, if you start to make full on-time payments on your credit card or other loans, your credit score will slowly improve.
However, a repossession is a very bad signal and you’ll probably have a hard time applying for any type of credit account. You’ll need to provide an explanation for your situation if asked.
Is it better for my credit score if I voluntarily return the vehicle?
No, it’s actually the same for your credit score. However, you could avoid the negative experience of having someone appear to take the vehicle by force if you return the vehicle on your own.
Further, you may avoid some additional late payments because you make it happen faster. It’s not a bad idea to return the vehicle on your own if you can’t avoid the repossession anyway.
Can I avoid a repossession after the lender’s warning?
Yes, you can avoid it. Lenders don’t want to reclaim your vehicle because they will lose money even if they sell it.
If you know that a repossession is not far away, you can contact your lender and discuss how they can help you pay them back. They’ll probably help you with offering lower payments or give you permission to skip a payment so you can catch up. In order to skip a payment, you will need to call as soon as you become delinquent.
Of course, you have to do it before it’s too late. Once the agent is near your car, there’s no way you can avoid the repossession. Letting the repossession happen so you can dispute it later is not a safe or recommended method as well.
What happens if the repossession agent cannot find the vehicle?
Obviously, the repossession agents can’t take the vehicle if they can’t find it. They usually aren’t allowed to enter your property such as a garage.
In this case, the lender will file papers in court. You’ll have to appear and give the vehicle or you will be accused of theft. It means that sooner or later, you’ll have to turn over the car, so you should consider returning it voluntarily if you have no intentions to pay back your debt. This is never a good idea.
Will a repossession prevent me from applying for other credit accounts?
The sure thing is that you’ll have a hard time getting your request for new credit accounts approved. Even if a lender accepts your request, you’ll probably have to pay much higher interest rates.
This is because a repossession means that a creditor has already lost his money by lending you. It makes other lenders trust you less, so you’re a riskier borrower. They outbalance this risk by higher interest rates or fees.
You may have a better chance of applying for secured credit cards or secured term loans. Many secured credit cards don’t require a high credit score to qualify you, but you’ll need to make a security deposit.
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