If you have ever pulled your credit report, you may have seen a repossession listed on it. This can be a scary thing to see, especially if you don't know what it is. In this article, we will discuss what a repossession is and what you can do about it. We will also provide some tips for improving your credit score in general. So, if you are concerned about a repossession on your credit report, read on!
What Is A Repossession?
A repossession is when a lender takes back property that was used as collateral for a loan. This can happen if the borrower stops making payments on the loan or defaults on the loan in some other way. The most common type of repossession is when a borrower defaults on their car loan and the lender takes back the vehicle. However, repossessions can also happen with other types of collateral, such as houses, boats, and RVs.
How Does A Repossession Affect Your Credit Score?
A repossession can have a significant impact on your credit score. In fact, it can lower your score by 100 points or more. This is because a repossession is considered a serious negative event by the credit bureaus. Additionally, a repossession will stay on your credit report for up to seven years.
Can A Repossession Be Removed From Your Credit Report?
In some cases, you may be able to have a repossession removed from your credit report. This is most likely to happen if the repossession was reported incorrectly. If you believe that the repossession was reported incorrectly, you can file a dispute with the credit bureau.
You can also try contacting the lender directly to see if they are willing to have the repossession removed from your credit report.
What If the Reported Repossession Has Inaccurate Information On Your Credit Report?
If anything is reported inaccurately on your credit report you have the right to dispute it with the credit bureaus and with the creditor.
Here's What to Do When You Pull Your Credit Report
Go line by line with each account
Is the balance correct?
Is the type of loan correct?
Is the open and closed date correct?
Is the account number correct?
Is the creditor correct?
You want to look at everything that is reported and check for accuracy. If you find ANYTHING THAT IS NOT CORRECT you then have a case to dispute it.
How to Dispute with the Credit Bureaus
If you find any inaccuracies on your credit report, you can dispute them with the credit bureaus. You will need to send a letter to each credit bureau that is reporting the inaccurate information. Include in your letter:
Your name, address, and phone number
The items you are disputing (include copies of any supporting documentation)
A statement that you are disputing the accuracy of the items
You can find templates for dispute letters online but it is best to write your own version. Sometimes the credit bureaus recognize template letters and will respond back saying it is frivolous.
Be sure to send your letter via certified mail so that you have proof that it was received.
What Happens After I Dispute an Item on My Credit Report?
Once the credit bureau receives your dispute letter, they will investigate the items in question. They will also contact the creditor to verify the accuracy of the information. The credit bureau must respond to your dispute within 30 days.
If the credit bureau finds that the information is inaccurate, they will remove it from your credit report. They will also send you a written notice of their findings.
If the credit bureau finds that the information is accurate, they will send you a written notice of their findings and the repossession will remain on your credit report.
How Do Voluntary Repossession Affect My Credit Score?
Voluntary repossession occurs when the borrower returns the collateral to the lender before the lender repossesses it. For example, if you can no longer make the payments on your car, you may voluntarily return the car to the lender rather than have it repossessed.
Voluntary repossession is not as damaging to your credit score as involuntary repossession, but it will still have a negative impact. Additionally, voluntary repossession will stay on your credit report for up to seven years just like involuntary repossession.
What is the Difference Between Voluntary and Involuntary Repossession?
The main difference between voluntary and involuntary repossession is that with voluntary repossession you are returning the collateral to the lender before they repossess it. With involuntary repossession, the lender takes back the collateral without you returning it first.
Another difference is that voluntary repossession will have a slightly less negative impact on your credit score than involuntary repossession.
Can I Get a Car Loan if I Have a Repossession on My Credit Report?
It is possible to get a car loan if you have a repossession on your credit report but it will be more difficult. You may need to find a lender that specializes in bad credit loans or you may need to put down a larger down payment.
You can improve your chances of getting approved for a loan by:
Making a larger down payment.
Shopping around for lenders that specialize in bad credit loans.
Improving your credit score.
Do You Still Owe After A Repossession?
In some cases, you may still owe money to the lender after your car is repossessed. This is called a deficiency balance.
For example, let’s say you owed $20,000 on your car loan but the car was only worth $15,000 when it was repossessed. In this case, you would still owe the lender $5000.
If you have a deficiency balance, the lender may try to collect this money from you. They may do this by suing you or by garnishing your wages.
Having a repossession on your credit report is not the end of the world. There are things you can do to improve your credit score and get approved for a loan. Be sure to dispute any inaccuracies on your credit report and stay current on all of your payments.
If you have questions about repossession or your credit report, be sure to speak with a professional. They will be able to help you understand your rights and options.
If you still have questions about how to having a repossession on your credit report feel free to contact us. We can create a step-by-step action plan to help you improve your credit and increase your credit score. Schedule a free consultation today!
Credit Repair Specialist