There’s no question that having your car repossessed will put a big dent in your credit score. But what are the specific consequences once the repo process is complete?

What a Repo Does to Your Credit Score

poor credit scoreAccording to Wayne Stanford, a credit expert and owner of New Start Financial, repossession could drop your score by 100 points depending on the severity of the situation. Each step in the repo process comes with a hit to your credit score:

  • Default – Once you’ve defaulted on the loan, the lender can repossess your vehicle. Depending on the contract, your car can be repossessed after only one missed payment, or the lender may choose to do this after a 60-, 90-, or even 120-day late payment is reported to the credit bureaus. The later the payment, the bigger the hit your score will take.
  • Repossession – When the vehicle is repossessed, your credit report will have a code associated with the repo. Code 01 is paid as agreed, code 08 is repossession, and 8A is a voluntary repossession. Regardless of whether you voluntarily give up your vehicle or it’s taken by the lender, your credit will take another hit.
  • Collection – The next step is to sell your vehicle at an auction. The lender will sell the vehicle at a reasonable market value to pay the loan balance, and if the vehicle sells for lower than the amount owed you’ll be responsible for any balance owed. If you can’t pay the remaining balance in full, some lenders may send your account to a collection agency. So on top of the repo, you’ll also have a collection on your report, which means your credit score will take another hit.
  • Judgment – In a worst case scenario, the creditor can sue you, get a judgment against you, and obtain a garnishment of wages to collect the amount owed on your account. This will show up in the public records section of your credit report.

To avoid any or all of this from happening, if you find yourself falling behind on your payments, you should contact your lender as soon as possible to discuss your options.

Bottom Line

Going through car repossession can leave you worried about your future finances. Things change, and if you find yourself needing a car after a repo, but your credit isn’t stellar, Auto Credit Express may be able to help.

We work with a nationwide network of special finance dealers who have subprime lenders available to help people with many credit challenges. It’s simple to get the process started. Just fill out our no-obligation online auto loan request form today.