A car repossession can cause lasting damage to your credit report. Your credit score could see a dip of up to 100 points, and, depending on how much is owed and how much the lender is able to sell the car for to pay off the remaining debt, you could end up owing money even after the car has been taken from you. Can you imagine paying a car bill for a car that has been forcefully taken from you?
In some cases, if you are proactive, you may be able to settle this debt for pennies on the dollar, either after the repossession or if you know a repossession is imminent. Negotiating with the lender is just one of many options a borrower has for dealing with a repossession.
There are ways to handle the remaining debt, ways to prevent the repossession entirely, and ways to have the repossession removed from your credit report so that it doesn’t continue to weigh you down.
Let’s discuss some of the ways to remove a repossession from your credit report.
4 Ways To Remove a Repossession From Your Credit Report
1) File a Dispute letter if the Repossession is Invalid
Worse than carrying a repossession on your credit report is carrying one that shouldn’t be there in the first place. If the car repossession is a mistake and you never had a car repossessed, then you have a right to have it removed from your credit report. You can also have the repossession removed from your credit report if it is more than seven years old.
Here’s how to dispute an invalid repossession on your credit report:
Start by reviewing all three of your credit reports (Experian, Equifax, and TransUnion). If you see an invalid item on one of your credit reports, the other two credit reports may also have it listed incorrectly. You should also keep an eye out for other unrelated inaccuracies while you’re at it. You can obtain copies of all of these reports by going to AnnualCreditReport.com. The Fair Credit Reporting Act allows you to obtain a free credit report from all three credit bureaus annually.
Once you have copies of all three credit reports, go through and check to see if the inaccurate information is on all three reports. Again, each of the major credit bureaus will have to be contacted individually.
Next, put together your dispute. You’ll want to circle the invalid repossession on the report itself and put together any supporting documentation that will help your case. Find anything you can that proves the repossession is invalid and send it along with your dispute.
If this is a case of mistaken identity and the car repossession has nothing to do with you, then this step will be fairly straightforward. You may share a name with someone else or have a very similar social security number.
Contact the Creditor who inaccurately reported the car repossession and explain the situation.
If it is your debt, but the repossession is inaccurate in some other way, you’ll still need to contact the credit bureaus. If the repossession is more than seven years old, then you’ll want to send any documents that confirm the date the repossession occurred. If it is your car loan, but the car was not repossessed, then you’ll want to send any correspondence from the Creditor that proves this is the case.
Verify all the dates, account numbers, payment terms, balances, and all other pertinent information. If anything is incorrect, you have the right to dispute it and possibly have the repossession removed. Even if the repossession happened, if the dates are wrong, or if any of the other information is wrong, you can request that it be removed from your credit report.
Along with the credit reports themselves and supporting documents, you’ll also want to include all of your contact information (name, address, phone number, and email) and a clearly written request to have the repossession removed, along with the reason why it should be removed.
You can send the dispute by mail or submit the dispute online via the web portal of the appropriate credit bureau. If you opt to mail the dispute, you should consider sending it via certified mail so that you get a receipt verifying when the bureau received it.
2) Negotiate with the Creditor if the Repossession is Valid
There are two times when you might negotiate with a creditor regarding a repossession: before the repossession and after the repossession.
As we covered in the introduction to this article, sometimes debt settlement is possible, even when repossession is imminent. Of course, this is most likely before the repossession takes place, so let’s talk about that scenario first.
If you’re negotiating with your lender before the repossession takes place, you’ll want to be proactive and communicate with the Creditor as soon as possible. Repossession costs the creditor money. Their best case scenario is that you pay off what you owe, even if it’s only a portion of the debt.
Before the car is physically taken, you have some leverage, so use it to your advantage.
- Start by contacting the Creditor and asking about debt settlement. You may be able to get them to agree to waive part of the debt in exchange for a lump sum paying off part of the outstanding balance.
- Get the agreement in writing before making any payment. You don’t want to risk giving over a large sum of cash only for the Creditor not to honor the terms of the agreement. This can happen due to miscommunication or human error, so get it in writing before any money leaves your hand.
- If repossession can not be avoided, offer to hand the car over voluntarily. This saves the Creditor a lot of trouble, so it gives you a little leverage. Offer to surrender the car voluntarily in exchange for not having the repossession reported to the credit bureaus.
All in all, you simply have a better chance of salvaging your credit if you communicate with your Creditor as soon as possible. You may be able to avoid repossession, settle your debt for much less than you owe, or, at the very least, keep the repossession off your credit report. The point is: being proactive gives you more options.
If you’re negotiating with your lender after the repossession takes place (involuntary repossession), then it’s an unfortunate truth that you’re less likely to get a favorable outcome. Still, there’s nothing to lose by trying since a repossession can cause so much damage. For example, a repossession can bring down your credit score by a great deal, and you could still owe payments after the repossession, depending on how much the Creditor is able to sell the vehicle for.
- Get in touch with the Creditor and ask them to remove the repossession from your credit reports. It may take a little time to get the right person on the phone for this, so be prepared to be persistent. You could also go the route of sending a Goodwill letter, which isn’t guaranteed to work but is always worth a try.
- If you still owe money on the car, you should aim for debt settlement. As we said before, lenders would rather get some of the debt than none of it. It’s in their best interest, as well as yours, to settle the debt.
- Owing what is known as a “deficiency balance” on the car may give you more leverage in having the repossession removed from your credit report. Rather than aiming for debt settlement, you could offer to pay the remaining balance on the car in exchange for the repossession not being reported to the credit bureaus. If the Creditor agrees to this, be sure to get it in writing.
3) Contact a Credit Repair Company
If you aren’t able to have the car repossession removed from your credit report yourself, you may want to consider hiring a professional credit repair company. There a number of ways that a credit repair company can either attempt to have the repossession removed or, if that isn’t possible, help you to minimize the impact of the repossession on your overall credit score.
You may have already attempted to negotiate with the lender or sent disputes. Even if that’s the case, a credit repair company may have a trick or two that you haven’t tried yet. They may employ strategies such as sending Goodwill letters or they may be able to find an inaccuracy that you didn’t spot.
If the repossession can’t be removed, a credit repair company can work with you to improve your credit in other ways. Old debts are only one of many factors that go into a credit score. The longer the repossession is on your credit report, the less impact it will have, compared with more recent debts.
A credit repair company can help you form solid strategies to improve your credit in a number of ways, such as via responsible use of a secured credit card or a solid credit-to-debt ratio. If a repossession can’t be removed, then finding ways to improve your credit history in other ways is the best course of action.
Both Credit Saint and Sky Blue Credit are reputable credit repair services that might be able to help you.
Credit Saint is a credit repair company that has been in business since 2004. They have an A+ rating with the Better Business Bureau and have helped remove negative mark from credit cards, a collection agency, repossession and other negative items from people’s credit reports.
Credit Saint offers various services to help you fix the most derogatory marks on your credit reports, such as late payments, charge-offs, and other services.
Credit Saint can help you with credit counseling, credit monitoring, and identity theft protection.
Credit Saint has a high customer satisfaction rate and offers a money-back guarantee on all their services.
Sky Blue Credit Repair
Sky Blue Credit Repair is another credit repair company that has been in business since 1989. They have an A+ rating by the Better Business Bureau and have high customer satisfaction.
Just like Credit Saint, Sky Blue Credit Repair can help you remove a charge-off along with any other delinquent account from your credit report. They also offer a money-back satisfaction guarantee on all of their services.
Both Credit Saint and Sky Blue Credit are reputable credit repair companies with a long history of helping people repair their credit. If you’re struggling to remove a repossession from your credit report, hiring one of these professionals may be the best step for you.
4) Wait it Out
If all else fails, you may simply need to wait it out. A repossession will be removed from your credit report after seven years. If it doesn’t come off at that time, then you can dispute it with the credit bureaus, as we covered in step 1.
How Does a Repossession Impact Your Credit?
A repossession is considered very serious and could lower your credit score by up to a hundred points, possibly even more. How greatly your score is impacted will depend on many factors, such as what other debts you owe, your credit utilization rate, the types of debts you have, and how often you make payments on time for your other debts. There’s no way to estimate how great the impact will be, but it’s likely to be significant.
You should do everything you can to avoid repossession, and if repossession can not be avoided, you should do everything you can to have it removed from your credit report as soon as possible.
Second Chance Auto Loans
After your car is repossessed, you may wonder how you will ever get another vehicle. Unfortunately, lenders will be hesitant to lend to someone who has had a car repossessed, especially if that repossession happened recently. Thankfully, there are second-chance auto loans designed for this exact situation.
A second chance auto loan is a subprime lender of auto loans. They are willing to lend to people with a poor credit history. Keep in mind that even a second chance auto lender may want you to wait several months after the repossession has occurred before they are willing to lend to you.
In many cases, you’ll end up paying higher interest rates which will increase your monthly payments. So it’s important to pick the right loan that you can afford.
A company we recently reviewed is MyAutoLoan.com. They are a reputable company that connects you with several financial institutions for the best rates, regardless if you have bad credit.
MyAutoloan.com is an online service that helps connect borrowers with auto loan providers. The website offers a variety of features to help you get the best loan possible, including:
- A loan calculator to estimate your monthly auto loan payments
- A library of articles on everything from buying a car to negotiating auto loan terms
- A network of participating lenders who are competing for your business
MyAutoloan.com is a great resource for anyone looking to finance a new or used car. With its easy-to-use tools and wealth of resources, MyAutoloan.com can help you get the best loan for your needs.
They are a reputable website that connects you with many different types of lenders so that you can find the best loan for your needs.
Wrapping It Up
Having a car repossessed can be a stressful event that has a negative impact to your credit score for years to come. The best course of action is to be proactive and reach out to the financial institution right away. You may be able to avoid repossession or at least arrange a deal so that the repossession isn’t reported to the credit bureaus.
After a repossession has occurred, you might consider hiring a credit repair company to help you mitigate damage to your credit report. If all else fails, you may simply have to wait seven years for the repossession to come off your credit report. A second chance auto loan may be the best option for you to get back behind the wheel.
All in all, no matter what your situation, the best thing to do is make a plan, set goals, and no matter the mistakes you’ve made in the past, be committed to fiscal responsibility moving forward. The good news is that the negative information on your credit can only be on your repot for seven years.
If you can practice good financial habits and avoid missed payments on your other financial obligations, you will see your credit score rising each month.