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How repossession affects your credit score

Plus, tips to bounce back after your score takes a hit.

Falling behind on your car payments could put you at risk of repossession. And the road back to financial recovery can be tricky to navigate. But there are ways to potentially remove a repo from your credit report or just make up those lost points.

How does a repossession affect my credit?

Repossession can wreak havoc on your credit report in a few different ways:

  • Late payments. Any payment that’s at least 30 days late may appear as a black mark on your credit report.
  • Loan default. At your lender’s discretion, you could be in default of your loan within 30 days of a missed payment.
  • Vehicle repossession. Once you’re in default, your lender can repossess the vehicle at any time, which is an additional mark against your credit.
  • Deficiency balance. Your lender will likely sell your vehicle to cover its losses, but this may not be enough to cover the loan. You’ll be asked to pay the deficiency balance, which is the remainder of what’s owed on the loan.
  • Collections. If you can’t cover the deficiency balance up front, your lender may send it to collections, which will also appear on your credit report.
  • Judgment. If the collection agency sues you to collect the deficiency balance and wins, that will be another negative mark on your credit report.

How many points will a repossession drop my credit score?

The impact a repossession has on your credit score varies depending on your individual credit history and the scoring model used. But typically, a drop of anywhere from 60 to over 200 points isn’t uncommon after an involuntary vehicle repossession.

How long will a repossession stay on my credit report?

A repossession stays on your credit report for up to seven years from the original missed payment date. But the negative impact won’t last forever — especially if you take active steps to repair your credit.

Can I remove a repossession from my credit report?

If you don’t want to wait seven years for a repossession to fall off your report, it’s possible to have it removed — but nothing is guaranteed.

A credit repair agency may be able to help you dispute any fraudulent or inaccurate credit report items. The credit bureau will investigate your claim, contact your lender, and may be able to get the repossession removed from your report.

You can also try contacting your lender to renegotiate. Your lender may agree to remove the repossession after you’ve paid off your outstanding debt in full. It certainly doesn’t hurt to ask.

4 tips for repairing your credit after repossession

Rev up your credit score and recover from a repossession with the following tips:

  • Clear your remaining loan balance. Even if your lender sells your vehicle to recoup its losses, you may still owe money on your car loan. Ask your lender if there’s a deficiency balance on your loan and do what you can to pay off the outstanding debt.
  • Pay your bills on time. Making on-time payments is the biggest contributing factor to your credit score and one of the best ways to rehabilitate your credit after a repossession.
  • Dispute credit report inaccuracies. Request copies of your credit reports from Equifax and TransUnion to address any inaccuracies or errors. To avoid paying a fee, you can opt to get a free report from several companies who offer soft credit check reports.
  • Drop your credit utilization ratio. Ideally, you want to utilize no more than 30% of your available credit. Anything higher than this debt-to-limit ratio and your score can suffer. Analyze your available credit and trim the fat to drop your credit utilization ratio.

Get your credit score

Name Product Starting Price Price Per Month Credit Scores Credit Monitoring Credit Reports Update Frequency
MyMarble
$0
$0 - $29.99
TransUnion
Yes
TransUnion
Monthly
MyMarble’s AI technology gives you real-time recommendations to improve your finances. Get actionable steps to improve your finances by paying down your debt faster, adjust your budget and build your credit score. See results in just 30-45 days.
Mogo Credit Score
$0
$0
Equifax
Yes
Equifax
Monthly
Open a MogoAccount and access your credit score for free with no impact to your score. Receive your updated Equifax credit score every month.
OFFER
Credit Verify Credit Score
$1 for 7 day trial
$29.95
TransUnion
Yes
TransUnion
Monthly
Instantly access your credit score and report online and get daily alerts and updates. Plus, premium members get $25 in bonus rewards every month which can be used towards discounts on everything from shopping and entertainment to dining and travel.
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Repair your credit

Name Product Price Per Month Credit Scores Credit Monitoring Credit Reports Update Frequency
MyMarble
$0 - $29.99
TransUnion
Yes
TransUnion
Monthly
MyMarble’s AI technology gives you real-time recommendations to improve your finances. Get actionable steps to improve your finances by paying down your debt faster, adjust your budget and build your credit score. See results in just 30-45 days.
Credit Building by KOHO
$7
Equifax
Yes
Equifax
Monthly
For a small monthly fee, KOHO will deposit a nominal sum of cash into your account. For six months, KOHO withdraws a portion of the deposited cash. It reports the withdrawal as a repayment to a major Canadian credit bureau, thereby helping you build and improve your credit score.
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Bottom line

Having your car repossessed can hurt your credit a few different ways, but it’s possible to recover. Take the wheel and steer your finances by communicating with your lender early and often.

Explore the mechanics of car loans and how credit scores work to avoid a potential repossession or to lessen the credit impact of the aftermath.

Frequently asked questions

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