Can You Remove Repossessions From A Credit Report?

Posted on December 4, 2020 in Debt

Credit reports have a lot of information about your finances — generally, a credit report shows almost everything there is to know about your creditworthiness. This includes any negative impacts due to a late payment or unpaid account. Additionally, accounts that have gone to collections or if you’ve filed for bankruptcy will show on a credit report as well, along with repossessions.

Thankfully, there are ways to get a repossession removed from your credit report, but you need to take the correct steps in order to do so. Let’s start with the basics. 

What is Repossession?

Repossession is what happens when a lender takes your property after you have failed to make payments for it. The lender might do the repossession themselves or hire a third-party service to do it. This only really applies to secure loans that are backed by collateral, which is why the interest on these types of loans is usually lower — the lender knows that they can repossess your collateral if you don’t pay. 

This can be applied to a car, your house, or any other type of property that you own. The lender will reclaim their ownership of your property because it has not been paid off. If your house goes into foreclosure, this is considered repossession. The most common type of repossession is dealing with car loans.

There are two types of repossession. One is voluntary and the other is involuntary. If you give your property back to the lender because you cannot make the payments, then this is considered voluntary. 

An involuntary repossession is when the lender has to come and take your property from you. There are certain rules in place when this happens, such as the lender or third party service is not allowed to physically threaten you or disrupt your neighborhood. 

How Does Repossession Affect Your Credit Report?

Repossession negatively affects your credit score and your credit report. The impact can last for years afterward — anytime your property has been repossessed it will appear on your report for seven years. 

Not being able to make your payments will bring down your credit score, too. This will affect what loans you can get in the future and might even affect your ability to apply for certain jobs. This shows lenders that you are not responsible for the money that is loaned to you. Even voluntary repossessions will show up on your credit report. 

How Repossession Affects A Co-Signer

If your property gets repossessed it can affect your co-signer and their credit as well. When this person agreed to help you qualify for a loan, they also agreed to take on the risk that comes with it. 

You should never let your property get repossessed if someone else’s name is on the loan along with yours. This could be detrimental to your relationship with your co-signer because of the severely negative impact it will have on their credit.  

What Happens After Repossession?

If the lender has already come to take back property, there are a couple of things you should know about what comes next. Each state may have their own specific guidelines and rules for repossession. 

In some states, the lender has to let you get your personal property from inside the car, house, boat, etc. The lender or third party service is also allowed to charge a fee for keeping your property. The lender will hold your belongings for a certain amount of time and you will have to schedule a time to come get them. 

The lender needs to tell you the total amount that is owed on your loan. After that, you will have approximately 20 days (in most states) to pay the amount that you owe to them. 

In some cases, the lender might offer you a loan extension or a loan modification to get your car or other property back. This can vary by lender. 

Make sure you know exactly how much time you have to get your car back before the lender tries to resell it. Even if your car goes to an auction, you might still owe them money. You might still have to pay the remaining balance after the car is sold to someone else. There are some states that do not allow this. Check with your local government for specifics about repossession. 

How to Remove Repossession From Credit Report

There are certain situations where you can get a repossession removed from your credit report. This does not apply to everyone, so you will need to look into whether or not your circumstances align with the qualifications. 

File A Dispute

The first thing you can try is filing a dispute. This only applies to people who think that there is inaccurate information on their credit report about a repossession. You can file a claim online or over the phone with the credit bureau. You will need proof that the information is incorrect. The credit bureau will go to the creditor to see if they can clear it up. If the lender can’t prove that the information on your report is in fact correct, it can be taken off of your report. 

Negotiate With Lender

When your property is repossessed, your lender loses money. It is better for them if you find a way to pay your debt, even if it takes longer than originally planned. So, try to negotiate a deal with them to pay less than the total amount, or to have lesser monthly payments with a higher interest rate. 

You can also try to come to an agreement with them about taking the repossession off of your report once you agree on a settlement. You should always write down the specific terms of your agreement and have the lender sign them. 

Credit Repair Companies

You can also choose to hire a credit repair company to try to remove a repossession for you. These are experts who can look at your credit report with the expertise to see what can be taken care of. These companies often have access to resources that you don’t have as the average consumer. It will usually cost you a fee to hire these companies and the results are not guaranteed to work. 

How To Prevent Future Repossessions

To avoid repossessions from appearing on your credit report, you should try to keep up to date on your payments. If you currently have any late payments, you should talk to your lender to see if there is anything you can do to rectify this before it becomes a repossession. 

If you have a late payment, it may still appear on your credit report, although it will not be as impactful as repossession and you can keep your property. 

If you can’t afford your payments for your car or mortgage, you can look into getting them refinanced through a different lender. You should look for an option that will lower monthly payments.

Be careful not to go upside down on a loan after refinancing it. This happens when the value of your car is less than the amount of money that you owe on it. 

Write down your budget, including your income and your monthly payments for your loan. You will know exactly how much money you can spend every month without running out. 

Make paying your loan a priority. Don’t put off your payments because you want to splurge on fancy food that week. Having a loan is a financial responsibility that you should take seriously. Failing to do so could result in long-lasting consequences for you and your partner or co-signer. 

If you are looking for other ways to get out of debt, there are a few options. You can try debt consolidation, debt settlement, credit counseling, or declaring bankruptcy. You should research all of these options to see if they would work for you. 

A repossession isn’t the end of the world for your credit score if you take the right steps to try and set things right.

If you have a repossession in your credit history, even after the seven-year period where it will stay on your credit, your credit may still be impacted. There are plenty of ways to rebuild your credit by making payments on time and keeping your balances low, and you may even be eligible to have the repossession removed altogether if you take the right steps.

Remember, if you think that the information about a repossession on your credit report is wrong to begin with, you should contact the credit bureau as soon as possible.

Sources:

  1. https://www.consumer.ftc.gov/articles/0144-vehicle-repossession 
  2. https://www.thebankruptcysite.org/resources/car-repossession-what-is-difference-between-reinstatement 
  3. https://www.mass.gov/service-details/what-to-know-if-your-car-is-repossessed

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