Removing a repossession from your credit report may seem to be a daunting task, but it is possible – given you meet a certain set of criteria.
Lenders will consider your payment habits of different loan types when deciding whether to lend money to a loan applicant.
You would hate them to find that you had a major loan that you defaulted on, and the property was taken as settlement for non-payment.
Lenders want to loan you money to get the item of your dreams. They also want to make money from those transactions, often in the form of finance charges. These finance charges help to fund future loans that the lender seeks to issue.
It’s easy to see why lenders, makers of loans, are more interested in you making timely payments and less interested in the taking your property away. But sometimes this does happen in order for the lender to obtain the lost funds from your nonpayment.
If you are in the market for financing a new car or truck, but fret over a looming repossession on your credit record, then you should try to understand some tidbits about your situation. You probably find yourself pondering ways to remove that past repossession from your credit report. Read on to find out how you can make that possible.
When you take out a loan on a new car, boat, motorcycle, or other type of possession, it essentially becomes collateral or security for the loan. The bank or lender specifies when you are to repay the loan principal, along with finance charges. When you fail to pay as required, you open the door to a repossession.
Repossessions are when the lender seizes property and takes ownership of it. You are no longer the owner of the property; however, you remain the owner of the loan you used to pay for the item.
There are two general types of repossessions: voluntary and involuntary. Under a voluntary repossession, you return the item to an agreed place or call your lender to pick up the item from your residence. Under involuntary repossession, the lender pursues you and picks up the item anytime they legally can.
Most people think they are free from repossession if they have paid for their car, but beware: a repossession can occur if:
- You take out a title loan for your vehicle and refuse to pay it
- You use your vehicle as collateral for a finance company or personal loan
- The IRS seizes your assets due to an unpaid balance
- There is a judgement against you in civil court to seize your assets
As unfortunate as this may sound, repossession remains a means for lenders from all arenas to regain lost income due to non-payment.
What Happens During a Repossession?
During a repossession, your property is rightfully and lawfully seized and sold to repay all or part of your debt; or at least it should be. The creditor has to lawfully follow state rules that apply to repossession. Most states require the creditor to notify you of what they will do with your property.
According to the Federal Trade Commission:
“Some states impose rules about how your creditor may repossess the vehicle and resell it to reduce or eliminate your debt. Creditors that violate any rules may lose other rights against you, or have to pay you damages.”
Also, during the repossession proceedings, if your property is at auction, you may have the right to attend and bid on your property. While this may not be the optimal choice, you may be able to buy back your items and settle your debts.
You may also have the opportunity to buy back your vehicle or other property for the full amount owed before it goes to auction. You would be wise to research repo laws, as they apply to your specific state.
Can I Stop a Repossession?
If you are finding this article before a repossession has happened, you should probably follow these steps to avoid a repossession and severely adverse information hitting your credit report.
- First, contact your lender. You should try to work out an agreement to make payments, even if they are partial payments on each payday.
- If you credit isn’t damaged too harshly, seek to refinance the balance of your loan with another company to make your payments more affordable. Credit unions often provide great rates on refinanced loans.
- Trade in your vehicle for a more affordable car.
- Take out a personal loan with a lower interest rate and payment to pay off your loans (loan consolidation).
These methods are more favorable than the blemish of a repossession on your credit report. If your car is at risk of being repossessed, then taking extra measures to ensure you have adequate transportation is necessary.
Often, I wish I knew then what I know now, as I suffered two vehicular repossessions.
Are there Repossessions on my Credit Report?
You weren’t able to stop your property from being seized, now you are wondering if the repercussion is reporting on your credit report. In order to find out, you must first obtain your credit report. You should wait 30-60 days after the repossession to give the creditor time to report.
According to FTC.gov, consumers are allowed one free credit report a year and also within 60 days of receiving an adverse credit decision based on the consumer applying for new credit (being denied.)
Not Having a Repo Reported
If you obtain your report and do not see a repossession, then you may be in luck. I learned this with both of my repossessions, that there are circumstances where a repo will not be reported.
In my first repossession, I owed $1200 on a title loan. It was my first car that I ever bought on my own and it worked perfectly fine. I needed money for other reasons, using my car as collateral.
My car was repossessed while I was at work and I had to find a ride home after my shift. I didn’t bother to check my credit because I knew it was terrible due to my student loans being in default.
Around two months later, I received a letter from the title loan lender. They stated that my car had been auctioned for $2200 and I would not be pursued for the balance.
Yes, you can be pursued for the balance if your possessions are not sold for an amount that covers your debt.
Finding A Repo On Your Report
Whether it is recent or in the past, finding a repossession on your credit report is never good. However, as repossessions age they have a lesser impact on your credit score. Some creditors or apartment rental companies may look at your entire report to determine your credit worthiness, so it may be wise to try to have the blemish removed.
Removing a Repossession from Your Report
It may seem a formidable task – attempting to understand what is needed to remove the repossession. But sensibly, you can hire a credit repair firm to handle the messy work for you. With low rates, you should be able to afford the small investment into clearing & improving your credit.
I found that the persistence and experience my chosen firm used in tackling my credit report woes led to the removal of over 8 items.
When I decided to remove items on my own, I found that I needed to understand the rules to gain a successful removal.
First, you want to ask the credit bureau(s) to verify your debt, whether by letter or online form. You will wait until the credit bureau responds with a resolution, preferably in your favor.
Since this is a repossession, you want to ask for verification of debt, rather than dispute the debt belongs to you, unless you are absolutely sure the debt is not yours and may be fraud.
Another way to remove a repossession is to reinstate the loan and ask the lender for more favorable terms and to remove the repossession from your report. You will want to get this all in writing, keeping a record of your new agreed upon terms.
Once you restart your payments – paying them on time, you should see more positive affects to your credit report.
What If I am the Co-Signer?
Co-signers are individuals who are basically guarantors on a loan of a person who is less than credit-worthy. When I applied for my first off-campus apartment, my grandfather was my guarantor. The student living company reported your payments each month, and that is how I first built good credit and a good rental history.
The co-signer is responsible for the loan or lease terms in the event the borrower defaults on the loan, and subject to some of the same penalties. The co-signer is guaranteeing that leasor or lender will receive payment, either from the borrower or himself.
As a co-signer, you can be subject to the being sued for the remaining amount of the loan and your credit can also be affected. You should take some of the same steps the primary person takes (as indicated above), because after all, you are responsible for the debt when the primary person defaults.
Cosigners may also want to check your credit frequently, as late payments may also be hitting your report. This is where you have a talk with the primary leasee about the status of the loan and the actions they are taking to satisfy the loan requirements.
You also have the right to take other steps to stop the repossession and reclaim the property before auction or resale. When the primary person receives notices, you should receive notices, too.
Co-signers must remain vigilant in monitoring their credit because they are usually the last to know when issues arise.
Moving Past a Repossession
A repossession can be embarrassing and debilitating, especially if it is your vehicle and your main form of transportation. My first repossession was both embarrassing and debilitating.
My second repossession was voluntary and less embarrassing. I was more embarrassed by having the car than not having it.
I had been car shopping with the deteriorating vehicle for months, waiting for my credit to improve. One of the dealers I visited pulled my credit and stated that the car was not reporting (which hurt me because I paid on time), so I could literally drop the car off and walk away without the creditor doing anything to my credit (which was a good thing because the loan was sub-prime, buy her, pay here).
When my brakes failed me, I parked the car, rented another, and went to a dealer to purchase a new car. I called the company and told them where they could find the car and that I would no longer make payments. I had a little over $2000 left to pay.
The buy here, pay here dealer sent me a letter stating they would auction the car and send me the proceeds in excess of what I owed. I never heard back from them and I did not see the debt report on my credit.
With my new car, I signed up for automatic bi-weekly deductions to split my payment in half and reduce how long I have to pay. Automatic deductions reduce issues with non-payment and ensures on-time payment, skyrocketing my credit score at a faster rate.
Repossessions are nasty, and honestly a little harder to get rid of if you don’t have the correct information. You should try to avoid, at all costs, the repo hitting your credit report.
If you are not able to repair your credit report on your own, you may benefit from hiring a credit repair firm before undertaking it alone. Allow the credit repair company’s experts to tackle the blemish for you by employing tried and true approaches.
If this does not settle the issue, pursue the original creditor for a resolve. This means exercising tactics mentioned above.
You will want to allow time to see results and continue to work until the desired result of removing the repossession from your credit report is achieved.