Seriously, how long will it take for my credit to recover from a repossession?
Repossession of a vehicle is a legal process where a bank or other lender can regain possession of your vehicle. Vehicle repo laws differ state by state, but your vehicle purchase contract should include all the details regarding your state laws.
After your vehicle is repossessed, the credit bureaus may report the repossession for up to seven years. If you still owe money on your vehicle loan, the lender can eventually hand over the debt to a collection agency.
In some cases, you may find yourself facing a balance on your repossession. This can happen when the repossessed vehicle is sold by the lender, but the existing loan balance is not covered. The remainder of your original loan, less the amount received for the vehicle may come back to you. If you ignore this balance, it can also be sent to collections and further damage your credit.
Reason for the occurrence of Repossession.
It typically occurs after a delay in your auto or car loan payments. Depending on the contract, your lender may be able to start the repossession process after the first missed payment. Other times a lender will let up to 90 days pass before beginning the repo process. It’s always best to stay in contact with your lender if you fall behind. This shows initiative and may result in the lender working with you through a hardship.
Voluntary repossession is when you return your car to the lender because your monthly payments are no longer affordable. An involuntary repossession is when the lender comes to take back the car. In this scenario, the lender can legally take the car from your property without your permission. Both “types” of repossession report the same on your credit report.
The vehicle loan is not canceled completely on Repo.
It’s important to be aware of the fact that if the vehicle is repossessed, the auto loan is not canceled altogether. The balance due on your loan still belongs to you even after repossession of the vehicle.
This implies that your auto-lender can still continue to collect the auto loan by any means. He can as well have the right to sue you for a deficiency judgment. This includes the balance due on the loan and costs associated with repossession of the vehicle. Your lender has the right to sell or auction your vehicle, but if the auction price is not enough to cover your loan, the balance is your responsibility.
How does a repossession impact your credit score?
Repossession badly hurts your FICO credit score. In fact, it can prove to be one of the worst things that can happen to your hard-earned credit score. Aside from bankruptcy anyways. Already, the delayed vehicle loan payments leading up to the repo are hurting your credit score once.
Moreover, it will also be listed in the public records section of your credit report. In addition to this, a collection associated with the deficiency judgment will negatively squeeze your credit score.
A repossession’s initial impact to your credit score is generally just the beginning. Subsequent issues may arise as the repossession ages.
If a consumer has a vehicle repossessed, how long does it remain on his credit?
Repossession will stick with you for 7 years, even if it’s voluntary. This impact on your credit score will lessen only as the time passes with your timely payments on your other credit obligations.
According to the credit bureau giant Experian, auto repossessions stay on your credit report for a minimum of seven years after the original delinquency date. Even though the repo has a significant impact on credit scores, the timely payments on other bills will offset the damage and rebind the FICO score faster.
Can you still buy a car after a repossession?
Of course. You can rebuild your credit, proving your credit worthiness once more to the reporting agencies. The reality is, lenders are just as excited for you to be in a good borrowing position again. This means they’ll likely
It is a prevalent myth that obtaining a car loan after repossession is impossible for at least seven years. It is undoubtedly not as easy, but it is indeed possible to obtain a reasonable deal on a car loan. Yet, it might just be a challenging task to find favorable terms shortly after a repossession.
How soon can I buy a car after a repo?
Well, this depends, how is the rest of your credit? For some people, you’ll be able to go out and buy a new car within a few days. I did this myself in my younger, irresponsible days. But, you’re going to need a good provable income and be willing to face exorbitant interest rates.
The ideal scenario is to wait about a year if possible. During this rebuilding period, be diligent with your credit and focus paying your debts and other bills on-time. You’ll find yourself in a much better buying situation using this method.
As always, if you are stuck with unsecured debts like credit cards or personal loans, talk to one of our certified debt specialists. Easing the burden of these unsecured debts frees up more of your budget to maintain your secured loans, like your vehicle.
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