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How Long Does a Repo Stay on Your Credit? 

Written by Banks Editorial Team
Updated August 2, 2023
4 min. read
Written by Banks Editorial Team
4 min. read

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Whether voluntary or involuntary, a car repo can leave a blemish on your credit report, significantly affecting your credit score. But how long does it stay there, and what can you do about it? 

Although the repossession remains on your credit report for seven years, its impact on your score may decrease over time. Read on to learn more about repos, how they work and ways to reduce the adverse credit effects. 

A low credit score can negatively impact your ability to get financing

The good news is that you can get help building a personalized plan for improving your credit and qualifying for better financing options.

What is a Repo?

A repo, or repossession, is a process where a lender seizes a financed item used as collateral because the borrower has failed to make payments. 

There are two types of auto repossessions: voluntary and involuntary. In a voluntary repossession, you willingly surrender the vehicle to the lender when you can no longer afford the payments. In contrast, an involuntary repossession occurs when the lender takes the car without your consent or knowledge, usually by sending someone to repossess it.

Repossession typically happens after a loan default, which means you have not upheld the terms of the loan agreement. Most lenders categorize loans as such once they become 30 or more days delinquent.

How Vehicle Repossession Works

Here’s an overview of how vehicle repossession works. 

Understanding the Repo Process

When you fail to make timely payments on your car loan, the lender has the right to repossess your vehicle. As mentioned above, repossession is a legal procedure in which your car is seized, typically without prior notice, and then sold to recover the outstanding debt. 

Initiating the Process

The repossession process usually begins after you’ve missed one or more payments on your car loan. The lender may hire a third-party repossession company that locates and reclaims the vehicle. 

Repo Laws and Your Rights

The laws surrounding repossession vary by state, but you have certain rights. For example, repo agents can’t use physical force, threaten you, or break any laws during the repossession. Furthermore, they cannot enter your property without permission if it is closed off by a locked gate or garage.

If you believe your rights have been violated during a repossession, you can file a complaint with your state’s attorney general’s office or seek legal counsel. Furthermore, it’s essential to know your rights after your vehicle has been repossessed, such as the option to redeem the car or reinstate the loan under specific circumstances.

Does a Repo Hurt Your Credit and How Long Does It Stay?

A car repossession can significantly impact your credit report and score. When you have a repo on your credit report, it will remain there for seven years, starting from the date of the first missed payment that led to the repossession. This negative mark can lead to a substantial reduction in your credit score, affecting your ability to secure loans, credit cards and other forms of financing. 

How Does a Repo Affect Your Credit Score?

A voluntary repossession allows you to negotiate with your lender, potentially reducing some of the negative effects on your credit score. However, the impact on your score mainly depends on your credit profile when repossession occurs. There isn’t a set number of points that your score will drop. Still, it is essential to remember that your credit score will decrease, whether it’s a voluntary or involuntary repossession.

Another aspect that can hurt your credit score during a repossession process is late payments. If you’re at least 30 days late on your loan payments, each occurrence can be reported on your credit report. Several late payment entries can severely damage your credit score. 

A low credit score can negatively impact your ability to get financing

The good news is that you can get help building a personalized plan for improving your credit and qualifying for better financing options.

How to Avoid and Prevent a Repo

Understanding your financial situation and being proactive with your lender can help prevent a repo from occurring. Here are some steps to take to avoid and prevent a repo on your credit: 

  • Keep track of your car payments and loan balance. Ensure you know the due dates for your car loan payments and that they are paid on time. Set up automatic payments or reminders to help you keep on schedule.
  • Openly communicate with your lender. If you’re struggling to make your car payments, reach out to your lender as soon as possible. They may be willing to work with you to adjust your payment plan, offer a temporary reduction in payments or even refinance your auto loan. Open communication with your lender is crucial to avoid late payment penalties and the possibility of car repossession.
  • Consider voluntary repossession. You can surrender your vehicle to the lender voluntarily. Your credit score will be impacted, but the consequences are often less severe than involuntary repossession. And it may even relieve you of your loan balance.
  • Manage your finances responsibly. Prevent late payments by prioritizing your car loan in your budget. This ensures you have enough funds allocated to meet your financial obligations and avoid the risk of a repo.

How to Recover from a Repo

In the unfortunate event your vehicle is repossessed, follow these tips: 

Getting the Car Back

Start by gathering as much information as possible about the situation. Here are some specific suggestions to help you move forward: 

  • Understand the reason for repossession: The primary reason for repossession is the default on loan payments. However, there could be other reasons, such as not maintaining proper insurance. Reach out to your lender and inquire about the cause of the repossession to address the issue appropriately.
  • Negotiate with your lender: In some cases, lenders might be open to working out a feasible payment plan to help you catch up on missed payments. Communicate with them about your financial situation and express your intention to rectify the issue. If you can come to an agreement, get it in writing.
  • Redeem the vehicle: In certain states, you can redeem the vehicle by paying off the outstanding loan balance and any repossession fees. This option can be expensive but can help you retrieve your car and fulfill your contractual obligations with the lender. Remember that there might be a limited time to redeem your vehicle.
  • Reinstate the loan: Some states also allow the reinstatement of an auto loan, which involves catching up on past-due payments and covering any repossession fees. If you choose this option, be sure to make timely payments and fulfill any other terms agreed upon with your lender. This can prevent future repossession and help you recover from the impact on your credit.

Strategies to Rebuild Your Credit After Repossession

Below are some tried and tested strategies to rebuild your credit health following repossession: 

  • Contact the lender again. Reach out to your lender with a proposal for a new, manageable repayment plan. By doing so, you demonstrate your commitment to repaying the loan, and your lender may be willing to work with you to remove or minimize the negative impact of the repossession on your credit. Remember that maintaining a good relationship with your lender can be the key to improving your credit score in the long run.
  • Dispute factual errors on your credit report. Your credit report may contain inaccuracies that could lead to a repossession being misreported. If you discover any errors, contact the credit bureaus immediately to fix the issues. It’s essential to provide supporting documentation to prove your case. Successfully disputing mistakes on your credit report can help improve your credit score and lessen the adverse effects of repossession.
  • Wait for the repo to fall off naturally. A repo’s impact on your credit score will gradually decrease over time. While waiting for the repo to fall off, focus on improving other aspects of your credit, such as making timely bill payments, keeping your credit utilization low and diversifying your credit mix. 
  • Seeking professional help. Consider hiring a credit counselor or credit repair company. These professionals can provide personalized advice on how to manage your finances and improve your credit. They can also guide you through the process of negotiating with your lender, disputing errors or creating a plan to prevent future repossessions.
A low credit score can negatively impact your ability to get financing

The good news is that you can get help building a personalized plan for improving your credit and qualifying for better financing options.

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