How Long Are Repossession and Foreclosure on a Credit Report?

A credit report lists a consumer's credit history, including loans and other accounts, balances, limits and payments. It shows whether a person pays on time, is late or skips payments. It also shows negative incidents like repossessions and foreclosures, when property is seized by a creditor.

Definition

A repossession means that a lender takes property used to guarantee a loan if the borrower stops making payments. It most commonly refers to a vehicle taken when a car loan is defaulted. US Legal says a person can get the car back by paying the owed amount, fees and penalties. A foreclosure means that a mortgage holder takes possession of a house when the buyer does not make the payments. The lender sells the house to recoup the money.

Time Frame

Both repossessions and foreclosures stay on a person's credit report for seven years, according to Credit.com. These items show up on the Equifax, Experian and TransUnion reports and are visible to lenders, employers and anyone else who views the reports. They are also considered when companies like FICO calculate the consumer's credit score.

Effects

Repossessions and foreclosures have a negative effect on consumer credit records. Lenders see these items as an indication of financial trouble or a person who cannot manage finances properly. They may refuse to give the person a loan or credit card, or they may offer an account with a higher-than-average interest rate. These effects last throughout the seven-year reporting period, although FICO says that they lessen if the consumer rebuilds a good record. The influence of a repossession or foreclosure ceases completely when it is erased after the reporting period ends.

Solution

There is no way to legally remove a repossession or foreclosure before the seven-year reporting period ends. Consumers can focus on credit rebuilding to offset their past problems. This includes getting new accounts and making every payment on time, FICO says. People who cannot get regular credit cards can save money to open secured accounts. They make a deposit and get a card with a limit equal to that amount. The deposit is frozen and guarantees repayment because it can be seized if the consumer defaults on the account. They eventually qualify for regular accounts and the past credit blemishes will be less important to lenders.

Considerations

The credit bureaus do not always remove repossessions and foreclosures automatically after seven years. Consumers should check at the end of this period to ensure the information is erased. They can complain if it is not, according to the Federal Trade Commission. Annual Credit Report gives yearly access to free credit reports, and the three credit bureaus are required by the Fair Credit Reporting Act to investigate disputes. They will remove the disputed repossession or foreclosure if the proper time period has passed.