An individual's credit score, which is intended to rate the likelihood that he will pay off a loan, is calculated using a number of different factors related to the person's credit history. These include the amount of credit he has taken out and his record in paying back these loans on time and in full. A car repossession badly damages this score.
Features
According to Bankrate.com, when a car is repossessed, a record of the reposition stays on a person's credit report for 7 years, from the date you missed the first car payment that sent you into permanent delinquency. For example, if you missed a car payment in September, restored the balance in October, and then missed another payment in November, never to return from delinquency, the record would date from November.
Effects
Since a person's credit score is composed using a number of variables, the amount of points that a repossession will cause a person's credit score to drop will vary depending on the rest of the person's record. The amount a person's score drops will also depend on the specifics of the repossession, such as the price of the car and by how much the note was delinquent
Considerations
According to the financial reference website AutoLoansDaily.com, a car repossession will not just lower an individual's credit score, but will lower their "auto loan specific" credit score, meaning the score that companies use when determining the terms at which to offer an individual a car loan. This may prevent an individual with a repossession on their record from receiving a car loan at reasonable interest rates for up to seven years.
Expert Insight
According to John Ulzheimer -- a former employee of Equifax Credit Information Services, a leading credit scorer, and the Fair Isaac Corporation, the inventors of the modern credit score -- a person who is having trouble meeting payments on a car would be wise to find an alternative to letting the car be repossessed. Not only will your credit rating be harmed, but it may be expensive, as the lender will likely force the borrower to pay the balance on the car's price after it is resold, any costs incurred reselling it and any costs of repossessing the car itself.
Solution
The only means of repairing a repossession's damage to a credit score is time. However, although the repossession's harm will only fully cease after 7 years, the harm can be moderated if the borrower pays the rest of his loans on time and in full, thereby bolstering the rest of his record.
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