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Repossession on Credit Reports When a lienholder repossesses an item (like a car), they generally report it to the credit bureau. These can continue to impact your credit report and score. In this article we will take a close up look at repossession and the impact on your credit from various angles.
What Does Repossession Mean for Your Auto Loan?
Repossession means the borrower has breached their loan obligations. After the repossession takes place, the lender notifies all three credit bureaus and a black mark is placed on your file. This derogatory mark can stick with you for as long as seven years on your report and effectively ruin your chances of future lending (13).
Credit Score Impact
Having a repossession hurt your credit score so much. Credit scoring models regard payment history as quite important, making up 35% of your score. If you have a repossession on your credit report, this tells lenders that in the past you were unable to pay for these financial duties and gives them cause to place into account more of high risk24. However, the record could continue to impose a negative scoring impact on your credit report and score even after you have paid off the debt that triggered repossession until it falls off naturally after seven years.
Financial Consequences That Stop with You
Your Credit Report Will Suffer…For a Long TimeHaving your car repossessed can dramatically harm your credit. You may have a harder time obtaining loans, mortgages or securing rental agreements because many landlords and lenders also pull credit reports before making their decision. Again, this black mark will be visible to prospective lenders and these can result in higher interest rates etc. if you are approved for credit14.
As a consequence, repossession can harm your credit history and make it more difficult to obtain financial opportunities — both now and in the future. To reduce this impact, you should ensure that all other accounts are paid on time and maintain an overall good history by challenging any false information with the credit bureaus.
