How Does a Car Repossession Affect Your Credit?

A car repossession can significantly damage your credit score. The negative mark can stay on your credit reports for up to seven years from the first missed payment. Typically, lenders don’t repossess a vehicle unless you’ve missed several months of payments, which means you may also have other negative items on your credit report, such as multiple missed payments and a loan default.

If the lender sells the car but doesn’t recoup the remaining loan amount, you’ll have a deficiency balance. If you can’t pay that, the lender may send the debt to collections, further hurting your credit.

How to Fix Your Credit After a Car Repossession

While a repossession can hurt your credit score for up to seven years, its negative impact can diminish over time, especially if you can add positive information to your credit file. Here are some steps to help you rebuild your credit:

1. Review Your Credit Reports

Start by reviewing your credit reports from Experian, TransUnion, and Equifax. Look for any inaccuracies or fraudulent information and file a dispute if necessary.

2. Get Caught Up on Past-Due Payments and Collections

While you can’t remove legitimate late payments from your credit reports, getting caught up on past-due accounts can help avoid further damage. Contact your lenders to come up with a payment plan that works for you.

3. Reduce Your Credit Utilization Rate

Your credit utilization rate is a major factor in your credit score. Aim to keep your utilization rate below 30%. Paying down your credit card debt can help improve your score relatively quickly.

4. Get Credit for Non-Debt Payments

Experian Boost® allows you to add rent, phone, utility, insurance, and even some streaming subscription payments to your Experian credit file, which can help increase your credit score.

5. Become an Authorized User

If you have a loved one who uses their credit cards responsibly, consider asking them to add you as an authorized user to one of their accounts. This can help improve your credit quickly.

6. Consider a New Credit Account

If you don’t have other credit accounts, consider applying for a secured credit card or a credit-builder loan. These can help you add positive information to your credit reports.

How Long Does It Take to Build Credit After a Repossession?

There’s no universal timeframe for rebuilding your credit score after a repossession. It depends on your overall credit history. If your car loan is the only problem, you may be able to fix your credit more quickly than if you have other issues to address.

How to Remove a Car Repossession From Your Credit Report

You can’t remove a repossession from your credit report if the information is accurate. However, if you find inaccuracies, you have the right to file a dispute with the credit bureaus. Start by reaching out to the lender to get the information corrected or removed. If that doesn’t work, submit a dispute with Experian and the other bureaus.

Monitor Your Credit to Track Your Progress

While working to fix your credit score after a repossession, it’s important to monitor your credit regularly. With Experian’s free credit monitoring service, you’ll get access to your FICO® Score and Experian credit report, along with real-time alerts when changes are made to your report.