How Long Does A Repossession Stay On Your Credit?

How Long Does A Repossession Stay On Your Credit

A negative credit rating or report never bodes well for anybody’s financial future. In any case, any financial decision that you make today can easily affect your future and either help or deter you in the process. In the case of debt secure by a property, a repossession is more likely to occur when you default on the payments. Once a property is repossessed by the lender, they will either sell or auction off the property to help cover the debt. But even in the case of repossession, there are ways how you can build back and help your credit recover.

Repossession: What It Entails

There are many potential credit effects relating to repossession. However, the latter is not exactly something that you will call universal since the laws and procedures governing repossessions vary greatly from state to state. The best way to check about those details is to have local resources of your state or find an attorney to help you.

In general, a lender like a bank can repossess your loan collateral on a secured loan, especially when you are late on paying your bills. There are cases in some states when the lenders are required to provide final notices so that debtors will be given a chance to have a grace period to make up for missed payments. One of the best things to do to ensure this is to check your contract with the lenders or speak directly to them regarding this concern. Otherwise, not settling the debt amount as quickly as possible can make you lose your property like a car or a house in a sale or an auction with the sale and auction process governed by state law. There is also a chance that the lender will take you to court to try and obtain a judgment. When this happens, the judgment for repossession will be taken in public and will reflect back on your credit report which in turn, might damage your credit even further.

So now the big question: how long does a repossession stay on your credit?

It is a point of fact that having a repossession easily makes your credit score take a plunge. This is not a very good sign of financial future since it can make getting loans in the future difficult for you. If you do nothing about the repossession on your credit, it can stay for as long as seven years from the date of the repossession which is still better than the 10 years it takes in the case of bankruptcy. However, there are ways how you can build back your credit after repossession. Also, if you cannot wait for seven long years, there are some steps that you can take as well to remove the repossession on your credit.

Building back your credit after repossession

One of the reasons why a repossession doesn’t look very well on your credit report is that it gives future lenders an implication that you are more likely to default on making payments compared to those who have a good credit report. No lender favors those who default and having a repossession in your credit record makes your chances of getting a future loan either too low or totally nil. But as you have read earlier, there are ways how you can build back your credit after repossession or totally remove it from your credit. Some of these ways are:

  • Deal with the repossession early on – perhaps one of the best things that you can do once repossession occurs with your credit is to pay off any outstanding debt you might have as soon as possible. Some lenders agree to a repayment plan or a debt settlement when you don’t have the money yet to pay the debt upfront just so you don’t have to undergo receiving a negative credit report. In this case, you should ask the debtor to remove the repossession in your credit report since you’re making payments anyway. Not all creditors agree to this since they know the implications of your actions but it’s always worth a try.
  • Dispute the repossession; if possible – there are times when a negative report of repossession can be disputed. This can be done when there is an evidence of illegal repossession which happens when state laws are violated. If this is the case, you can send a letter of dispute to credit reporting agencies and request that the repossession report be removed. Usually, it takes 30 days for such agencies to investigate the dispute.
  • Avoid repossession in the future – without a doubt, the best way to avoid a repossession the second time around is to build good credit habits. This is not just about making payments on time but being upfront with your creditors when you can’t pay so that you can go with a payment plan or sorts to settle the unpaid balances. Believe it or not but most debtors would rather have you pay than repossess the loan collaterals that you have from them.

Be financially wise: know the law

When it comes to dealing with credit scores, repossessions, and creditors, knowing the law is a definite advantage. State laws regarding repossessions vary and if you know that such laws were violated when your properties were repossessed, then you will have a good enough reason to have the case overturned. You should be aware that some laws require a written notice from creditors which specifies how much you still owe them or that there are repossession laws from some state wherein yelling or swearing is not allowed during repossession. Most of the time, creditors who violate this law and debtors who know what to do with such violations ended up having their dispute become successful and their negative report of repossession removed from their credit.

Given that repossession greatly affects your credit, it is very ideal to put everything in writing, especially when you deal with your creditors. Also, having a bankruptcy attorney or any other legal counselor to help with the repossession will help you understand how to deal with it best.