How To Remove A Repossession From Your Credit Report

Anytime you use a loan or line of credit to obtain an asset, you must pay back the debt over time or risk losing the asset. While most people borrow money with good intentions, falling behind on loan payments can result in a repossession. Not only will you lose the asset you bought with a loan or line of credit, but that repossession also hurts your credit score. However, if you get that item removed from your credit report, it won’t hurt your score. If you want to remove a repossession from your credit report, you have come to the right place. In this article, we’ll dive into some of the possibilities.

Can a repossession be removed from a credit report?

It’s possible to remove a repossession from your credit report, but you don’t have many options. You can either negotiate with the lender or file a dispute. That’s it. You can only file a dispute if something is inaccurate. You could dispute a repossession that is completely accurate, but that doesn’t mean the repo will get removed. The credit bureau you contact will check with the lender first, and if the lender verifies the repo, it will stay on your credit report. 

How long does a repo stay on your credit report?

A repo stays on your credit score for seven years. The seven-year timeline starts at the first missed payment that acts as the initial domino. This first action is known as the original delinquency date, but you shouldn’t mix it up with prior missed payments. 

If you missed a payment 10 years ago, caught up, and continued paying on time for a few years before proceeding to fall behind and then getting your asset repossessed, that late payment from 10 years ago does not affect how much time the repo remains on your credit report. 

How a repossession can affect your credit

A repossession is going to hurt your credit. There’s no way around it. A repossession demonstrates a lack of debt management skills. The repo itself and missed payments leading up to the event will hurt your payment history, a critical component that makes up 35% of your credit score. Since credit reports assess you based on your ability to manage debt, a repossession will hurt your score.  

5 steps to removing a repossession from a credit report

Letting a repossession remain on your credit report will hurt your score and make it more difficult to recover. Lenders won’t feel comfortable giving you capital when they see a repo in your credit history. Removing the repossession from your credit report is the best path forward. You may not have to wait for the seven-year expiration if you follow these guidelines.

Step 1: Obtain a copy of your credit report

If it’s been a few years since your repo, it may have been removed from your credit report. You can also check to see if a recent repossession got added to your credit report. The major credit bureaus each let you get a free copy of your credit report once a year. You can get a report from Equifax, Experian, or TransUnion. It’s best to only request a report from one of them to save your two free credit report requests for later.

Step 2: Contact the credit bureau

You have to contact your credit bureau to obtain a credit report. Most banks let you see your credit score, but your credit report is a lot more detailed. You can reach out to any of the three credit bureaus and get a free copy. Requesting a copy of your credit report does not impact your credit score.

Step 3: Dispute the repossession

If there are any inaccurate items on your credit report, you can dispute them. Removing late payment history that is incorrect will strengthen your score, and it’s even better if you can remove a repossession for this reason. An accurate repo won’t get removed since the credit bureau you contact will check with the lender, but resolving an inaccuracy is one way some consumers can remove repossessions from their credit reports.

Step 4: Try negotiation

You can’t remove a repossession from your credit report via dispute if it’s accurate. However, you can reach out to the lender and negotiate a new approach. While the lender won’t be happy about the loan’s current status, no financial institution wants to lose money. Reaching a debt settlement or coming up with a new payment plan can remove the repossession from your credit report. You will have to repay the loan and reach an agreement with the lender for this to work. It’s not a guaranteed path, but it provides a glimmer of hope.

Step 5: Wait till the repossession falls off

The repossession will vanish from your credit report after seven years. Some people wait out that duration. Not everyone needs a loan during that time frame, and some people can improve their credit scores to a respectable level even with the repo. You may not have the best credit score because of the repo, but depending on the type of financing you need, it may be possible to wait it out for seven years. However, a financial obligation does not go away after seven years. You can’t run away from debt and think it will expire in seven years if you never pay the principal. 

How to improve your credit score after a repossession 

You can’t always get a repossession removed from your credit report, and you shouldn’t wait until the seven-year expiration to take action on your credit score. Raising your score by a few points after a repossession can help you get better financing when you need a loan. Using these strategies will help you repair your credit and avoid the same pitfalls that led to repossession.

1. Make payments on time

Making on-time payments is the best way to improve your credit score. Lenders look at your score to determine if you can handle debt, and on-time payments showcase your ability to manage debt. Payment history makes up 35% of your credit score and is the largest category. 

2. Keep your credit utilization low

Credit utilization is the second largest credit category. It makes up 30% of your credit score, and all you have to do is keep a low balance. Credit utilization measures the percentage of your used credit limit. If you have a $1,000 credit limit and have borrowed $300 against it, you have a 30% credit utilization. A 30% credit utilization is acceptable for improving credit, but it’s ideal to keep it below 10%. A lower credit utilization ratio also results in lower interest payments.

3. Work to pay off any existing debt

Making the minimum monthly payment will improve your payment history and help you in the short term, but not addressing existing debt can hurt in the long run and leave you financially vulnerable. You should make more than the minimum monthly payment on your credit card and set goals around your debt. Review your income and expenses, make tweaks, and set a deadline to become debt free on your credit card and other loans. 

Creating deadlines and setting mini milestones will increase your motivation and help you stay on target. You can use the snowball method to pay smaller debt first or the avalanche method to address higher-interest debt first. You can also opt for debt consolidation to put all of your financial obligations under one roof. Minimizing expenses helps right away, but expanding your career and picking up a side hustle pays off better. There are only so many ways you can optimize your expenses and cut costs before making difficult decisions about necessities.

4. Avoid applying for too many new accounts

Applying for loans, credit cards, and lines of credit lets you access more capital. While these resources can help you afford more assets, most of these loans include hard credit checks. These credit inquiries lower your score by a few points. Although a single hard credit check won’t decimate your score, several hard credit checks can add up. Be mindful of how many applications you submit, and prioritize loans and credit cards with greater chances of approval.

5. Consider a credit builder loan

A credit builder loan isn’t your typical loan. Instead of receiving money upfront, you only receive the principal after fully repaying the loan. These loans are less risky for lenders and allow borrowers to build credit history with on-time payments. Consumers only take out these loans to start building credit or to repair damaged credit. Unlike most loans, credit builder loans do not have hard credit checks. The lender will do a soft pull on your credit, which will not impact your score. Most credit builder lenders report your payment history to the major credit bureaus, and you should only work with a lender that includes this feature.

Don’t Let a Repossession Hold You Down

Enduring a repossession is tough. You lose an asset and still have debt. Your credit score will take a hit, and it will take some time to recover. You can’t undo what has happened, but you can take steps toward a better future. Building your credit puts you in a better position to get financing when you need it, and some consumers can get their repossession removed from their credit reports. 

While it’s not a guarantee, negotiating with your lender can work. Getting into dialogue creates more possibilities and can result in a mutual agreement. The lender can receive their money, and the consumer can rebuild their credit and finances sooner.

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