How Long Does a Repo Stay on Your Credit Report?

A car repossession can stay on your credit report for seven years and the repossession will initially lower your credit score. If there’s an error on your report, your score could be lowered even more. You can dispute credit report errors and take steps to repair your credit after a car repossession. In this article, we’ll help you learn what you can do to minimize the impact that a car repossession will have on your credit report and how to improve your credit score if your car has already been repossessed.

Credit Basics

Your credit history is a report of your borrowing and payment activities. Your credit score is a number that tells lenders whether you’re likely to pay back debt. Your credit score is, in part, calculated by activities noted in your credit history. A credit report and credit score are not the same, and your credit history report will generally not show your score.

What’s on a Credit Report?

Credit reports from the major credit bureaus generally contain the following borrower information: 

• Personal information (name, address, date of birth, and Social Security number)

• Public information (liens, bankruptcies, judgments, car repossessions, etc.)

• A list of secured and unsecured credit accounts with payment history (car loans, mortgages, school loans, credit cards, personal loans, etc.)

• A list of collection agency activity

• A list of companies that have requested your credit history

• A summary of your credit history

Experian, TransUnion, and Equifax are the three biggest consumer reporting agencies. These companies collect and report information for credit histories.  Other specialty consumer reporting agencies track your credit activities as well. Generating credit reports is one service that the credit bureaus provide. They also generate credit scores as a different type of service. The Fair Credit Reporting Act (FCRA) insists that consumer reporting agencies provide accurate information. The credit bureaus can face fines for not reporting accurate information. 

What Is a Credit Score?

Your credit score is, essentially, a grade of your ability to pay back debt. It’s a three-digit number based on a mathematical formula. Generally, scores grading your credit range from 300-850. The higher the number the better. Different companies use different formulas, so your auto loan company could use one scoring formula, and your bank may use another. Credit scoring formulas consider hundreds of factors. These formulas use data from your credit report to calculate your score, but they also consider timing. Your score can change in a short time, depending on your recent payments, missed payments, and available credit. Negative information and positive information are applied with different weights. But generally, negative items lower your score, positive items raise your score. 

A well-known formula for credit scoring is FICO. The FICO formula considers payment history, the amount of debt you have, the types of credit you have, how much of your credit is new credit, and the length of your credit history. 

The Federal Reserve reports four key factors that credit scoring formulas use: 

• Payment history

• Amount of consumer debt

• Length of credit history

• New credit

Payment history is listed as the most important factor in credit scoring evaluations. This is one reason why it’s important to make timely monthly payments on your car loan and other types of debt.

A lender will look at your credit score to determine whether you’re a safe bet or a risk. It’s easier to get access to new lines of credit when you’re considered a “safe bet.” A good credit score can also help you qualify for lower interest rates, and that will save you money in the long run. A bad credit score means higher interest rates. It’s a catch-22. When you have bad credit, you’re stuck paying more and that puts you further in debt and makes your loans harder to pay. You may even get to the point where filing bankruptcy sounds like a good idea. You can work to repair your credit but beware of credit repair companies offering a quick fix. Repairing your credit is like preparing a meal in a slow cooker, not getting a burger at McDonald’s. 

Credit scoring formulas are used to determine whether loans can be given for houses, cars, and personal loans. They are also used for some employment decisions. If you have bad credit, it’s going to be more difficult to get a credit card, a house, a personal loan, or a car. But negative credit doesn’t have to last forever. 

How a Repo Affects Your Credit

It’s probably no surprise that a car repo won’t help your credit score. But did you know it can knock down your score by 100 points or more? A car repossession can stay on your credit history report for up to seven years, but it’s not just the car repossession that hurts. Those missed car loan payments that occurred before your car was repossessed and any deficiency balance you may still owe also hurt your credit score. But don’t worry, there are things you can do to help repair your score and credit history. First, you should understand what a deficiency balance is. 

A deficiency balance is the remaining balance on your car loan debt after your car is repossessed. Even if your car was sold to pay off the debt, the money received for the sold car may not have covered the added fees and penalties, the cost of the repossession, and added interest. An auto lender can go to court and ask for a judgment against you for the deficiency balance owed. 

One way to avoid these extra costs is to use a “voluntary repossession” option. If you give your vehicle to the loan holder before an involuntary repossession occurs, they can’t charge you for certain repossession fees. You may even be able to work out a repayment plan with the financial institution if you’ve shown you’ve made reasonable efforts to pay off your loan balance. 

If your car is repossessed and a delinquency judgment is entered, it will show up in the public records section of your credit report history. The judgment will be used when running credit scoring formulas, and the negative impact will lower your score and potential to get approved for future credit.

A lender looking at your credit history report won’t see your side of the story. They won’t know that your wallet was stolen or that your hours were cut at work or that you had to move to get out of a bad situation. They don’t see you and your personal financial situation — they see a number that indicates the risk factor of giving you a loan. They will see a history of late payments and missed payments, a lender’s added expense of repossession, and a lender’s added hassle and expense of a court process. A lender is accountable to others, often insurance companies and shareholders, and they cannot take that risk. But there are things you can do post-repossession — in the next chapter of your story — to better your situation and improve your status to a “safe bet” over time. 

Removing a Repossession From Your Credit Report

If you have a repossession on your credit history report, you might be able to negotiate a debt settlement and new terms with the lender and have the deficiency amount and repossession removed from your report. For this to work, you’ll likely need a large sum of money available to you right away. Most lenders won’t agree to a debt settlement offer unless they can get paid a significant amount immediately. 

Even if you can’t use debt settlement to get your car repossession removed from your credit report, you should check your credit history report for accuracy and dispute any errors to potentially improve your score. The Federal Reserve has reported that Experian, Equifax, and TransUnion each have records on over a billion credit accounts and over 200 million individuals. With such large databases to manage, it’s easy to see how mistakes can be made. 

Consumer reporting agencies have been known to mix up files and merge incorrect records. For instance, if your name is Angela your report might include a credit history from someone named Angelina. Check the details of your account numbers, payment history, and personal information to make sure there haven’t been any mix-ups. You should also make sure that nothing has been missed. 

Back in 2003, Sallie Mae simply didn’t report information on several accounts. Creditors not reporting helpful information can be just as harmful as reporting the wrong information. Also, typos and computer errors are easy to make, and identity theft is rampant in this digital age. These types of credit reporting mistakes can result in inaccurate credit scoring and can hurt your chances of getting a future loan with favorable terms. 

You can request a free copy of your credit history report and compare the entries on the report to your records. The three major credit bureaus (Experian, TransUnion, and Equifax) must provide you with a free credit report every year if you ask. You can order a report online at annualcreditreport.com or call (877) 322-8228 for your free report. As of 2021, the credit bureaus are temporarily allowing people to request a report every week due to the pandemic. If you make a debt settlement or pay off your car loan, check that the changes are updated on your credit reports. 

Consumer reporting agencies are required by law to report accurate information, and they must investigate your claim for inaccurate information. There is an online process you can use to dispute credit report errors with the credit bureaus. But, it is also wise to notify your lenders and loan service providers in writing of the errors so you can create an easily reproduced record of the investigation. 

Other Ways To Improve Your Credit 

As time passes, your car repossession will fall to the bottom of your credit report, until seven years have passed and it is removed from your history completely. In the meantime, you can improve your score and repair your credit history by paying off loans on time. The formulas for your credit scoring will consider your new timely payments. You can also take out new small loans to facilitate a new, positive track record. Taking out a secured credit card can be a helpful first step. Just be sure not to take on new debt if you can’t afford the payments. Your most recent payments will take precedence over the older missed payments, so don’t give up, you can repair your credit. 

If you’re not in a position to take a new loan or new payments and you don’t see your financial situation improving, you may want to consider filing a Chapter 7 or Chapter 13 bankruptcy. Bankruptcy is meant to give people like you a fresh start, and it can help you start over with a clean slate after a car repossession. 

Let’s Summarize...

A car repossession won’t last forever on your credit report — it should be removed after seven years. In the meantime, you can take steps to lessen the negative impact your car repo has on your credit score. Reviewing your credit history report for errors, correcting those errors, and taking the steps to build a new credit history will help. 

If it seems like it’s too much to handle, you can talk to a credit repair lawyer about strategies you can take to repair your credit and reach your goals. You could also talk to a bankruptcy lawyer and learn what debt relief options you have available after a car repossession. Whichever road you decide to take, just remember you’re in the driver's seat. Make the decision that works best for you.