How Repossession Affects Your Credit

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How Repossession Affects Your Credit

A repossession could occur if you are delinquent on debt secured by property, such as an auto loan. The mark on your credit report can negatively impact your credit score and can put your repossessed property in jeopardy of being sold or auctioned off. Here's what you need to know about how repossession affects your credit health and how to build your credit back after the fact.

Potential Credit Effects

First, let's talk about what repossession entails. The process isn't universal and the laws and procedures governing repossessions vary from state to state, so if you need specific details on the laws in your state, please check your local state or local resources and reach out to an attorney. In general, a bank or lender may be able to repossess your vehicle or other loan collateral on a secured loan if you are behind on bill payments. Some states might require lenders to provide a final notice and chance to make up payments before repossessing property. The terms and conditions of your contract may also tell you if you get a grace period, so it's wise to check your contract and speak directly to your lender if you're concerned.

If you don't settle the outstanding debt as quickly as possible, you could lose your car or other property in a sale or auction. As we mentioned previously, state laws will govern how the sale has to be conducted and what kind of notice you are entitled to receive about the sale, so we encourage you to visit the website of your State Attorney General or local consumer protection agency for more information. The lender or bank may also have the right to take you to court and obtain a judgment against you, which can also be reported as public record information on your credit report and damage your credit further.

If your car or other property is sold for less than the amount you owe, you may still be responsible for the "deficiency balance," or the remaining difference. This debt amount can remain on your credit report until it is paid. Once you pay the debt in full, the credit bureaus typically continue to report the repossession status on the account on your credit report for seven years from the date of the original delinquency.

Building Credit After Repossession

A repossession is unfavorable to have on your credit report because it suggests to future lenders and banks that you are likely to have a high risk of defaulting in the future. It can also compromise your chances of getting favorable rates and approval on future loans and credit. After a repossession has occurred, the best option for your credit is to pay off the outstanding debt as soon as possible. You can attempt to do so by talking to your lender about a debt settlement or repayment plan. It may also be a good idea to request that the lender or the bureaus report the loan as resolved so that it can be noted as "Paid in Full" or "Satisfied" on your credit report, which could lessen the impact of the repossession on your credit report.

Aside from making that request, the only other way you may be able to build credit after repossession is to practice good credit habits. As time passes, the repossession on your credit report will usually have less and less impact on your credit score until it eventually falls off your credit report seven years after the original delinquency. Good credit habits include paying bills on time consistently, keeping your credit use below 30 percent of your credit utilization rate and other credit-building strategies.

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All Comments

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2 Contributions
66 People Helped

Helpful to 66 out of 73 people

My credit report shows a repo on an auto loan. Truth is my auto was stolen and impounded. I reported this to my credit union and in order for me to get the car released from the impound I had to pay the credit union fees. They inturn rewrote my auto loan and listed the original loan as a repo. This should be against the law since the car was reported to the police as stolen. I should not have a "repo" on my credit report. I am still paying for the car and have not missed a payment. Credit reporting is not accurate. My opinion....credit reporting is bogus.

Reply by
diamondgirl515

1 Contribution
4 People Helped
Helpful to 4 out of 7 people

Something is very wrong here. With a car loan your contract stated you must keep the car insured. Your auto insurance would have paid the note off for a stolen vehicle impounded or not. Sounds to me like the impound lot was actually the lot your lender uses for repo vehicles. Lots of folks report a stolen car when it was not stolen but actually reposessed. This is usually an honest mistake and not a false police report.If your lender reports to the credit bureau, they are obligated to report true and factual information. Even if you paid it in full 30 min after the repo, it still must be reported since it did happen( or they could be held liable).Perhaps your resoultion lies with your insurance company? If thlis was some sort of error with your credit union. they can correct your credit report since again, they are obligated to report true and factual information. Good luck and I hope this gets resolved so you dodnt have to deal with the negative impact for 7-10 years!!

Reply by
donewithcredit

2 Contributions
1 Person Helped
Helpful to 1 out of 1 people

i agree do as dave ramsey says forget credit pay off all debt and save 1000 pay cash for all items needed.

2 Contributions
41 People Helped

Helpful to 28 out of 33 people

I payed 500 to a credit asistence service to help me reduce debt. They never used that money to pay my debt. When I found this out stoped making farther payments and now they just added themselfs as another creditor that I am delinquent on. What the hell. How can this type of fraud be fought? I think they were called kelly financial services.

Reply by
riceboy1701e

2 Contributions
77 People Helped
Helpful to 35 out of 39 people

Do NOT trust any of these so-called "credit repair" services. That's the only reason they exist: to put you further in debt and pocket your money.

You can repair your own credit. I did! Just request your free credit scores from annualcreditreport.com. This is NOT to be confused with frfeecreditreport.com (which isn't free). You are allowed one free credit report annually from the "big three" credit bureaus.

Better luck in your endeavors.

3 Contributions
31 People Helped

Helpful to 29 out of 36 people

I was laid off in August 2008 after the economy tanked, and I fell behind on my car payment. While I will admit that I was in the wrong, I did give them what I could out of my UI benefits, but it wasn't enough. They repo'd my car while I owed only $1,100 on the original $18k loan. The repo truck showed up on the morning of X-mas eve 2008.

The bank auctioned off my car within 60 days of taking it, so by the time I had enough money to try and get my car back.... it was too late.

'Murica... hell yeah.... Land of the "free," and home of the "we'll take yo sh*t if you don't give us our money, even though you don't have a job, then you won't be able to get a job, because you don't have a car.... and you'll never buy a new car again."

Reply by
smarie12

1 Contribution
3 People Helped
Helpful to 3 out of 3 people

I was in the same situation however i got repoed while at Kroger with my daughter and husband. We ended up filing for bankruptcy so we could get the car back without paying anything. Ally Financial was going to sell the car two weeks after it was repod. 

Top Contributor

Reply by
thecyberguy

10 Contributions
24 People Helped

Same thing happened to me. I only owed $900 but thats when my UI had completely ran out. My car was towed on May 2011.

2 Contributions
15 People Helped

Helpful to 15 out of 17 people

I don't understand why a repo is open I paid my car off to get it out of repo and still driving it 4 yrs later.

2 Contributions
41 People Helped

Helpful to 13 out of 18 people

Does a reposesing company have the right to run my credit report 7 years after the voluntary reposesion? I have an inquary on my credit report as of feb this year. I voluntarily returned the car in 2009 around nov. What the hell do this people run my credit for 5 years later?

1 Contribution
5 People Helped

Helpful to 5 out of 5 people

theres ways around it, but my suggestion is if your too far on payments and dont have a job then just give up the car get a job get a way there and go to a car auction and buy a car that could be the same or better for cheaper. all repos go to a car auction and if it sells and the car didnt sell what you paid then you still in debt.... i learned my lesson and so did my girl friend. but it happends and its life just bounce back and get a secured card.

Top Contributor
1143 Contributions
1219 People Helped

Helpful to 37 out of 57 people

Hey guys! Here is an easy solution to many of your problems! Call Credit Pros 1-877-235-0324 they can help. Only pay for items they fix on your credit! Plus they also offer "free" advise!!! It's a win win solution!!! You can get the help and resources you need, plus free information to stop any creditors from taking advantage of you the next time around! Good luck my friends!!!

Reply by
riceboy1701e

2 Contributions
77 People Helped
Helpful to 42 out of 45 people

I repaired my credit simply by requesting my FREE annual credit rep[orts. When I found the derogatroy marks, I contested them and WON. All without having to resort to "credit repair" SCAMS like this one and many others.

You can repair your credit on your own by checking your FREE credit report from the "big thtee" agencies: Transunion, Equifax and Experian. You an do this all on your own without having to contact any of these credit repair scam artists.

And DO NOT rely on "freecreditreport.com". It is NOT free. Credit Karma RULES! Even my own credit union recommends Credit Karma!

1 Contribution
6 People Helped

Helpful to 6 out of 8 people

I was dumb enough to co-sign for my ungrateful graddaughter.. When I found out about the non payments I offered to take possenion of the car and the payments if she would only let me know where the car was.  She now drives a new Range Rover that belongs to the boyfriend.  Go Figure.

Reply by
richard0748

1 Contribution
0 People Helped
Helpful to 0 out of 14 people

What's a graddaughter?

Reply by
Tohjam

1 Contribution
0 People Helped

I did the same for my daughter, tho she isnt driving a Range Rover now.

I count myself as almost lucky as I have two other cars I am paying on which I am hoping will kind of offset the damage.

1 Contribution
2 People Helped

Helpful to 2 out of 2 people

I recently tried to qualify for a loyalty program at a toyota dealership. However, they left out one important fact, the loan has to be serviced through Toyota. I was told I would qualify for their Loyalty program after a year of payments and be approved for 0% interest rate. So they told me in order to do so I needed to get any Toyota 2010 or newer and it didn't matter how much I was financing since after a year they would take the car back since Toyota offers huge buy back incentives for the dealership. So the year has come and not one payment I missed. I go in this past weekend to trade the car in and they tell me I have $7400 in negative equity and if I wanted to trade the car in I would need to put $7,000 as a down payment. 

So I went to another Toyota Dealership and they said for me to do this. Get a new car and they will finance it through Omni World which is Toyota's Bank and that's how I would qualify for the loyalty program. Which I did. The General Sales Manager then told me to call the original car bank and tell them to get the car. He assured me that it won't hurt my credit. And that after they sell the car the difference I will have an option to pay or not pay. However, if I elect not to pay this will not affect my credit either way. And after 3 years everything will be better for me. My question is, have I been duped again?

Reply by
annamorales1

1 Contribution
0 People Helped

Did you get duped? Or is it better for u now!?

2 Contributions
12 People Helped

Helpful to 10 out of 17 people

Is there ANY difference between a Repossession and a Voluntary Repossession????

Reply by
Nikipm

1 Contribution
1 Person Helped
Helpful to 1 out of 5 people

This is my question too -- is there a difference?

Reply by
BigDee65

2 Contributions
0 People Helped
Helpful to 0 out of 1 people

apparently not

Reply by
jmcockrell

1 Contribution
2 People Helped
Helpful to 2 out of 2 people

There is no difference between repossession and voluntary repossession.  My daughter turned her car in (which I co-signed on) because she lost her job and they still put it on my credit as a repossession.  I want do that again.

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