If you fail to make timely payments on an item such as a car, your creditor can repossess, or take back, the car without first going to court. The repossession's impact on your credit score is both negative and lasting.
Time Frame
A repossession remains on your credit for seven years. After the repossession comes off your credit report following this time period, your score should improve, depending on whether you have made timely payments on other debts.
Additional Effects
As a result of the repossession, the creditor may sue you for a "deficiency judgement,, to collect the difference between what you owed and how much the creditor received from selling the car. In addition, you may have to repay auction fees and towing fees, among other costs. This may place additional financial strain upon you, leading to you becoming late or delinquent on other payments. These other late and delinquent payments will also negatively affect your credit.
Voluntary Versus Involuntary Misconceptions
Voluntarily turning over your vehicle to the creditor and having the creditor repossesses the property have the same effect on your credit. Either scenario will show on your credit as a repossession, and will be equally bad.
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