What to Do When You Have a Repo on Your Credit Report?

Car financing is a secured loan because your vehicle acts as collateral. Most contracts let the lender take back your car as soon as the loan goes into default. You have no right to prior warning, and the finance company does not have to take you to court first. You lose your ride, and the repo also goes onto your Experian, Transunion and Equifax credit reports.

Credit Reporting

Your vehicle repo goes into your credit files, where it looks bad to other lenders and lowers your credit score. Sometimes the repo is not reported correctly, which gives you an opportunity to potentially remove it. Order your credit reports for free (see Resources). Check everything, including payment and repossession dates, amount owed and payment delinquency dates. You have the right to dispute any mistakes. The repo is erased if the lender is unable to verify the reported data within a month.

Credit Rebuilding

A repo stays on your Experian, TransUnion and Equifax credit reports for seven years from the date of the initial loan delinquency if there is no mistake to dispute. This bad mark hurts you most in the first few years, but you offset its effects by rebuilding your credit in other ways. MyFICO, the Fair Isaac scoring company site, identifies paying down large debts and making all payments by the due dates as two critical items for a good credit score. Focus on those two activities after the repo.

Reporting Time

Your vehicle repo should disappear on its own when the seven year reporting time concludes. Check your credit reports to be sure, and file disputes with credit bureaus still reporting it after the allowable period. All effects on your credit score stop once the repo is gone.

Prevention

You may be able to prevent a repo by talking to your finance company as soon as you know that you cannot make a payment by the deadline. The lender may agree to let you pay late for one month or change your due date so it aligns with your paychecks. Sometimes the delinquent payment can be added to your last loan payment. Ask for any agreement in writing if it involves a change to your contract.