March 17, 2022 |4 min read Show
Find out how long a repossession stays on your credit and how to rebuild your creditMarch 17, 2022 |4 min read When you buy a car or another type of personal property, it’s hard to imagine you’d have to give it up. But if you’ve taken out a secured loan for the purchase, that can happen. That’s because the item you bought might serve as security for the loan. And the lender might have a right to repossess it if you default on your contract. Repossession can be upsetting, and it can impact your credit. But it won’t follow you around forever. Read on for ways to recover and rebuild your credit after repossession. What Is Repossession?Repossession might happen if you fail to make payments on property—like a car or TV—that you bought with credit. It also can occur if you don’t pay on time. There are two kinds of repossession: involuntary and voluntary. In an involuntary repossession, the lender typically uses a repossession specialist to take the property when the buyer defaults on the loan. In a voluntary repossession, the borrower gives up the property to avoid an involuntary repossession and the extra cost that comes with it. The lender may either keep the repossessed item or sell it to recover at least some of the loan balance. The borrower might still owe money after the repossession if the lender doesn’t recover enough. You might be able to stop a repossession and keep your property if you contact your lender as early as possible. Your lender may be able to work with you on a more affordable payment plan. How Does a Repossession Affect Your Credit?Information about a repossession could be included in your credit reports. Let’s say your car was repossessed. If your lender reports your account to the credit bureaus, your credit report might include the repossession. It might also show that you made late payments or missed payments on the car loan before the repossession. Credit-scoring companies use the information from your credit reports to calculate your credit scores. So you could see a drop in your credit scores from the repossession itself and from related events that impact your payment history. That’s because payment history is an important factor in calculating your credit scores from both FICO® and VantageScore®. It’s hard to say what will be the exact impact of repossession on your credit scores, though. It can depend on several factors, including which credit reporting agency provided the information and which credit-scoring model was used in the calculation. How Long Does a Repossession Stay on Your Credit?According to the Consumer Financial Protection Bureau, repossession can stay on your credit report for seven years. Experian® says it’s measured from the date that the loan payments stopped. How to Rebuild Credit After a RepossessionIf you’re dealing with financial hardship, you’re not alone. Rebuilding your credit scores will take time, but there are some steps you can take to start. Here are some ideas:
Recovering From RepossessionRepossession of a car or other personal property can impact your credit for a number of years. But it won’t last forever. By making consistent smart financial decisions over time, such as responsibly using credit cards and other lending products, you can help steer your credit in the right direction. Learn more about Capital One’s response to COVID-19 and resources available to customers. For information about COVID-19, head over to the Centers for Disease Control and Prevention. Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information. We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional. Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many credit scoring models. It may not be the same model your lender uses, but it can be one accurate measure of your credit health. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Some monitoring and alerts may not be available to you if the information you enter at enrollment does not match the information in your credit file at (or you do not have a file at) one or more consumer reporting agencies. Does voluntary repossession affect your credit?Voluntary Surrender on a Credit Report
That will be reflected on your credit report, as well. Both are serious negative marks on your credit, but a voluntary repossession may hurt your credit scores slightly less than a repossession.
How long does a voluntary surrender Stay on credit?Voluntary surrender and repossession are loan defaults, which stay on your credit reports for seven years. That type of negative mark will harm your scores, especially your automotive-specific credit scores. The next time you apply for a car loan, you'll likely be deemed high risk and charged high interest.
Is a voluntary surrender better than a repo?Because a voluntary surrender means you worked with the lender to resolve the debt, future lenders may view it a little more favorably than a repossession when they review your credit history. However, the difference will likely be minimal in terms of your credit scores.
Is voluntary repossession a good idea?When you can no longer afford your car payments, voluntary repossession may seem like the best way to get your car loan off your hands. But returning your car to your lender could have serious financial consequences, including your account going into collections and your credit taking a hit.
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How much does a voluntary repossession affect your credit
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