How Long Does a Repo Stay on a Credit Report?

Car loans often stretch buyers to the limit, according to Fritz Elmendorf of the Consumer Bankers Association. People take multi-year loans and sometimes roll part of a previous balance into the new account. Overextension can result in missed payments, which often leads to a repo. This action stays on credit reports for a lengthy period.

Definition

The term "repo" commonly refers to vehicle repossession. A lender provides a consumer with money to purchase a new or used car. The vehicle acts as collateral to ensure repayment. The car can legally be seized if the loan is not repaid, the Federal Trade Commission explains. The lender then sells the vehicle to cover as much of the unpaid obligation as possible and hold the borrower responsible for any outstanding amount.

Cause

Repossessions are caused by defaulted car loans. The FTC explains that loan contracts usually contain a provision that allows a repo as soon as the buyer defaults, which can mean just one late payment. Some lenders will negotiate with debtors who call them to ask permission for a late payment or request a changed due date, according to the FTC. They are not under any obligation to do this and may still decide to do a repo.

Time Frame

A repo stays on credit reports from Experian, Equifax and TransUnion for seven years from the date the loan fell behind, according to Maxine Sweet of the Experian credit bureau's public education department. Any creditor, employer, insurance company, utility provider, landlord or other person or firm that orders a report from one or more of those bureaus within that period sees the repossession details. The repo also affects the consumer's credit score during that time.

Effects

Sweet states that repossessions negatively affect credit reports for the entire seven-year reporting period, although effects lessen over the years. Initially, repos make it hard to get new credit and can hurt the ability to get insurance policies or new jobs, especially when combined with other bad items like late payments, collection agency accounts, foreclosures and bankruptcy filings. Sweet recommends managing other accounts properly to further offset the effects. The repo totally loses its influence when the reporting time is over and it is deleted.

Warning

The FTC warns that there can be a big discrepancy between the amount of money a lender gets for a repossessed vehicle and the owed balance of the loan. The original buyer is responsible for repayment of that difference, called the "deficiency." Most states allow lenders to sue for recovery of this money, as long as the repo and vehicle sale were handled legally.