How Long Does a Repo Show Up on Your Credit Report?

A repossession involves several steps. You have late payments, then default, then repossession. If the repossessed vehicle is resold for less than the amount you still owe, you may still be liable for the difference, and if you don’t pay it the dealer may sell your account to a collection agency. They may even sue you and get a judgment against you. 

Each of these events will become an entry on your credit report and all of them will harm your credit. They will appear on your credit report for seven years from the original delinquency. You may be able to prevent a repossession and you may be able to remove repossession from your record, or at least reduce its impact. 

How Does Repossession Affect Your Credit?

If you borrow money to fund a major purchase, like a car, the item you purchase will often become collateral for the loan. If you fail to pay the loan, the lender can ask you to return the item. If you do not, they can seize it, subject to some restrictions. This recovery of collateral is called repossession. 

Repossession is a process that involves multiple steps, each of which can affect your credit:

  • The process starts with late or missed payments. These will be reported by your lender and will appear on your credit report. 
  • If you fail to make payments for a specified period, your loan will be declared in default. This will also appear on your credit report. 
  • Once the loan is in default your collateral is subject to a repossession. If repossession is actually carried out it will be entered on the “current manner of payment” section of your credit report. 
  • Repossession may not be the end of the process. Repossessed vehicles are often sold at auction. If the sale price is less than what you owe, you will be liable for what is called a “deficiency balance”. Storage and towing fees may be added. 
  • If you fail to pay this balance it may be sold to a collection agency. It will be reported as a collection account. 
  • The lender may sue you to recover the deficiency balance. If they win a judgment against you it will appear in the public records section of your credit report. 

Each of these events will be recorded as a separate entry on your credit report, and the impact on your credit may be substantial. 

How Long Will Repossession Remain on Your Credit Report?

Negative entries on your credit report are removed from your record after seven years. 

The seven years are computed from the date at which the loan became delinquent and was not subsequently brought up to date. If you fell behind on your loan payments, caught up, and then fell behind again and ceased to make payments, the seven-year period would start from the date of your first missed payment in the second period of delinquency. 

All of the entries related to the repossession will expire on that date, even if they actually occurred later. If your lender sues you and wins a judgment 8 months after your first missed payment, the seven-year period will still be computed from the date of that first missed payment, not the date of the judgment. 

Avoid Repossession if You Can

If you are behind on your payments and facing possible repossession, do everything you can to prevent it. Remember that lenders don’t want to repossess. They want you to pay what you owe and return your account to good standing. If you are willing to make an effort to pay they will often work with you to avoid repossession. You have several options: 

  • Contact your lender and negotiate. The sooner you talk to them, the better. Try to reach out to your lender as soon as you know you won’t be able to make a payment on time. Offer to pay whatever you can and try to set up a payment plan. You may be able to get them to defer repossession and even to defer reporting late payments. 
  • Consider credit counseling and even a debt repayment plan. Many credit counseling agencies will not include secured loans like a car loan in a debt repayment plan but placing your other debts in a repayment plan could free up money to help you make your car payments. Seeking credit counseling may help to convince your lender that you intend to pay your debts. 
  • Consider selling your car, especially if it is worth more than the balance on your loan. If you sell your car and repay the debt you may have enough leftover for a downpayment on a cheaper car or a used car. Even if you don’t you will protect your credit from the impact of a repossession. 
  • Return the car yourself. If you know that your car is going to be repossessed you can return the car, which is called a voluntary surrender. Your credit will still take a hit, but you won’t be hit with storage or repossession fees and the goodwill gesture may help you avoid a lawsuit. 

Probably the most important thing you can do to avoid repossession is to resist the temptation to buy more car than you can afford. If you’re facing repossession now that advice won’t help you, but it’s something to remember the next time you consider buying a car! 

Can I Remove a Repossession From My Credit Report?

It’s difficult, often impossible, to remove a derogatory entry from your credit report. Your credit report is supposed to be an accurate representation of your financial history, and legitimate entries are difficult to remove. 

Be suspicious of anyone who claims to be able to get accurate information removed from your credit report, especially if they want you to pay. It is usually not possible to remove accurate information from a credit report. Many scammers prey on people with serious financial problems, and a promise to make black marks on your credit go away is a favorite tactic. 

If your car has already been repossessed, get copies of your credit report. Check to make sure all entries connected with the repossession are accurate. If there are mistakes you may be able to file a dispute and have some entries removed. 

If your account has been sold to a collection agency you may be able to have the collection item removed as part of a settlement. Offer to pay what you can and see if they are willing to settle. If they agree to remove the collection item, get the agreement in writing. 

Once the repossession sequence is on your credit report it is very difficult to get it removed, unless you can prove that it’s inaccurate. You will have to wait out the seven years before it’s removed. 

Credit scoring models usually prioritize newer information over older information, so the impact of the repossession will diminish over time, even before it drops off your report. If you get your finances in order and establish a good financial record, you may be able to rebuild your credit. 

Conclusion

Repossession can do serious damage to your credit. There are several steps in the repossession process and each one can leave a negative entry on your credit report. Unless those entries are demonstrably inaccurate you will probably not be able to remove them.

Try to prevent repossession if you can. Even if you can’t bring your payments up to date you may be able to negotiate a repayment plan and prevent repossession. 

If you have been through repossession, check your credit report and see if all the entries are accurate. If they are, you will probably have to wait out the seven-year period for removal. Those entries will eventually drop off your credit report and their impact on your credit will diminish before they do. Plan for the future and work on getting your finances in order and you can recover from repossession.

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