When it comes to getting new credit, a repossession can really hinder your ability to take on another car loan, since auto lenders see a recent repo as a big red flag. A repossession stays on your credit reports for up to seven years – that’s a long time! However, after each passing year, the impact on your credit score lessens, and it does eventually fall off your reports.
Once Your Car Has Been Repossessed
After a vehicle repossession, you may be wondering how it escalated to this. Usually, a repo is a response to an auto loan default, which is caused by missing too many payments, or possibly even one payment (depending on the language in your loan contract).
Once your car has been taken away by the repo man, it’s usually prepared to be sold at auction. Lenders typically sell repossessed vehicles in an attempt to cover your remaining loan balance.
If you want to get your car back, you may be able to get in contact with your lender before it's sold. In many cases, your lender has to notify you of when and where the vehicle is going to be sold.
Sometimes, a lender gives you the option to reinstate your auto loan if you agree to make up the missed payments, or if you can pay for the remaining balance in full. For many people, though, this isn’t an option.
After the car has been repossessed and sold at auction, the repo is probably already on your credit reports or about to be reported, and this can drastically lower your credit score. Not only does your credit report likely reflect the repossession, but the missed or late payments that led to the default are also harming your credit, too.
Once the repo is reported on your credit reports, your vehicle is probably long gone – been taken away, sold, and then reported on your credit reports. This means that the chance to negotiate the repossession with your auto lender is probably off the table.
If you’re in the position where you still have your car, but you’re worried about defaulting, contact your lender and ask about your options if you’re trying to overcome hard times.
Can You Remove a Repo From Your Reports?
Once a repossession has happened, removing it from your credit reports is difficult.
If you want to remove the repo from your reports, and it was legitimate, you’re probably going to be stuck with it. There are ways to remove accounts from credit reports, but it involves proving that the account is inaccurate or outdated.
When you want to remove something from your reports, it’s called filing a dispute. Oftentimes, you’re required to provide proof that the account you’re disputing is incorrect. If you have a bank statement proving that you’ve settled an account or one that proves you’ve made your payments, you can send those to the credit bureau reporting the inaccurate account, and they'll remove the error from your credit reports if they find it’s a true mistake in their investigation.
However, a repossession that came about because you defaulted on your auto loan isn’t likely to be removed. If you missed one too many payments, and they were reported and proven by the lender, removing the repo probably isn’t possible. Typically, once you file a dispute, the credit agency must investigate the claim within 30 days. The heart of a dispute is that you’re saying that is listed on your credit reports is incorrect or inaccurate.
If you can prove that the repossession was a mistake, you could probably get the repo removed from your credit reports. If the lender repossessed your vehicle and you hadn’t missed any payments, then you could prove that with receipts and bank statements showing you made your payments on time, get your car back, and then have them remove the repo from your credit reports. This is rare, though. The process of a repossession is a costly and lengthy one for the lender, so an accidental repo isn’t likely.
If your repossession was the result of a default, it won’t be on your credit reports forever! Nearly everything negative on your credit reports falls off after seven years. Every year after the repo, the adverse impact on your credit score does lessen. If you need another vehicle, you still have options for financing even with a repossession on your credit reports.
Car Buying Options After a Repo
Since a legit repossession is there to stay on your credit reports, you’ve got a few other options to check out for your next car. Here are three routes to look into:
- Private seller or pay cash – Working with a private seller and paying cash could be a way to skip over the credit check that most auto lenders require before you can get financing. A private sale may not yield you the most security or peace of the mind that the vehicle is in good shape, but when you need transportation and lenders won’t give you the time of day due to a recent repossession, it's worthwhile to check out. Since it’s a private sale, it won’t be reported and your credit reports aren’t likely to be run by the seller.
- Buy here pay here (BHPH) – BHPH dealerships use in-house financing, which means that your dealer is also your lender. Most dealerships separate the two roles, which means that you’d typically need to find a third-party lender or work with the lenders that are signed up with the dealer, not at a BHPH used car lot! They do everything themselves, and this means that they usually skip the credit check, so you’re likely to get approved for financing if you’ve got the income and sizable down payment even with a recent repo. However, BHPH dealerships may not report your on-time payments to the credit agencies, which wouldn’t help repair your credit.
- Subprime lender – These third-party bad credit auto lenders are signed up with dealers that have a special finance department. They do check your credit, but they also look at many other aspects of your financial situation to determine your ability to take on a car loan. This means evaluating your residency history, income stability, credit reports, and requiring a down payment. If your repo is over a year old, a subprime lender may not be able to work with you right away, but it can be an opportunity for credit repair. These loans are reported to the credit reporting agencies, so a good payment history does rebuild your credit.
Getting Back on the Road
If you’re ready to put a repossession behind you and get into your next auto loan, start right here with Auto Credit Express. We have a nationwide network of dealerships that work with bad credit lenders.
To begin, fill out our no-obligation, secure, and free car loan request form. We’ll look for a dealer in your local area that can work with unique credit situations.