You might have an asset repossessed, and now you think you’re ready to buy a new one, but your credit report still has the repossession in the record.
Don’t worry! This article will help you take the necessary steps to remove repossessions from your credit report.
We've researched by looking at reliable resources from the credit bureaus and gathered the best tips from finance experts on removing a repossession from your credit report.
Read until the end to learn about a unique tip to improve your credit standing. Don’t skip important reminders and make mistakes in getting repossession off your credit report.
How to remove repossession from your credit file?
Repossessions can be removed from a credit report, especially if they involve inaccurate information. In this section, we’ll show the different situations when you can request their removal.
There are various steps for removing a repossession from a credit report.
File a dispute
It depends on whether there’s incorrect information involved. If there are inaccurate details, such as wrong names, dates, balances, or addresses, you must file a dispute with any of the major credit reporting agencies (Equifax, Experian, and Transunion).
The Federal Trade Commission provided a sample letter to dispute errors on your credit file. It contains the following:
- Social Security Number (SSN)
- Birthdate
- Current address
- Name of the lender or creditor
- A list of items you’re disputing
- A detailed description of each item
- Request for removal or other specific changes
Make sure to get a copy of your credit file from Annual Credit Report’s website. Under the Fair Credit Reporting Act (FCRA), you’re entitled to one free report annually from each credit reporting agency.
You must also attach the following documents:
- Copy of your credit report with a highlight on the erroneous information
- Copies of documents to prove your claim
Here’s the mailing address of each credit bureau:
Equifax
Equifax Information Services, LLC
📮 P.O. Box 740256
📍 Atlanta, GA 30374-0256
Experian
Experian
📮 P.O. Box 4500
📍 Allen, TX 75013
You can also submit your document online by visiting Experian’s website.
Transunion
TransUnion Consumer Solutions
📮 P.O. Box 2000
📍 Chester, PA 19016-2000
After filing the dispute, the credit bureaus will ask the lender to confirm the information they provided. But if the lending company doesn’t respond within 30 days, the bureau will remove the erroneous detail.
Take note that there’s no guaranteed repo removal because if the lender provides the bureau with the right information, the credit reporting agency will only correct the mistake. In the end, there’s still repossession in your file.
But can a credit repair company remove a repo? Aside from filing the dispute yourself, you can also hire the services of credit repair experts. They can offer sample dispute letters written by lawyers.
Although they’re finance experts, it’s still not a 100% chance that your repo will be removed. It depends on the evidence you submit and the lender’s response to the bureau.
Negotiate with lender
But if you’re wondering how to remove a paid repossession from your credit report, you need to take a different route. You must negotiate with your lender to see if you can settle your debt.
So should you pay off a repossession? It’s a good idea to pay your account balance because lenders also want the more convenient option. If you fail to pay, they may file a case against you, costing them more money.
Paying off a repossession also shows future creditors that you have the initiative to settle your balance.
You have two options to remove repossession from your report: you can file a dispute or negotiate with your lender.
How do repossessions affect my credit score?
Repossessions have a lasting effect on your score. So how bad is a repo on your credit? It can reduce your score by 100 points. Also, it can show lending companies that you may not be able to pay your debts on time.
Worse, under the FCRA Act, repossession remains on your report for seven years. Credit bureaus include it in your file starting from the date of the missed payment, which leads to the property's repossession.
So if you’re asking when a repo falls off credit or how long a repo stays on your credit, the usual answer would be seven years. But based on what we mentioned earlier, you can delete it from your file by sending a dispute letter or negotiating with a lender.
You might also wonder, “How long does a voluntary surrender stay on credit?”
First, let’s define voluntary surrender. It involves communicating with your lender to resolve your debt. It also stays on your credit file for seven years, the same as a repossession, because they’re considered loan defaults. But if prospective lenders look closely at your report, they’ll notice that you have the initiative to pay your debt.
Also, it’s good that your past creditor didn’t file an action against you. Although a civil judgment won’t directly affect your score, it can still influence your future creditors’ decision. They can search for your name, and once they discover that you have been subjected to a civil case, they’ll likely categorize you as a high-risk borrower.
So if there’s an account closed repossession on your report, the lender will look into it to know the reason behind its closure. It may be closed due to delinquency or negotiation.
How to get a loan after a repo?
Most people ask if they can still get a loan after repossession. You can still qualify for a loan, but you might have a difficult time looking for lenders. If a creditor approves your application, the company might offer high-interest rates due to the repossession.
We also discovered that most lending companies don’t approve borrowers with a repossession that’s less than one year. So if you wish to get a loan a few months after the repossession, chances are, your application won’t be entertained.
Fortunately, there’s another way to buy properties or get loans after a repossession. You can ask a relative to co-sign with you. A co-signer adds their name to your loan application. It means they agree to assume responsibility once you stop making payments.
Since lenders also consider the co-signer’s credit history, you should look for someone with excellent credit standing.
So what will happen once the credit bureaus finally remove the repossession from your report?
It varies depending on how much score you’ve lost, but usually, you’ll notice a 100 to 150 increase in your score. Some people may acquire 50 points, while others may gain up to 150 points. These scores vary because every debtor has different situations regarding repossession.
How can you improve your credit after a repossession?
We compiled tips on achieving a 700 credit score with repo. It’s completely possible since there are people who have done it.
1. Review your credit report.
Andrew Rosen, the president of Diversified LLC, made an interesting point. According to him, you should not hide from it. Get your credit reports and find out what is really going on with your credit. Once you know your credit standing, you can see how to improve.
2. Pay off outstanding debts
One of the most common tips to improve your score is paying outstanding debts, including the deficiency balance from repossession. Once you clear the debt under your name, your credit standing will recover more quickly.
But what if you have multiple debts?
You can consider a debt consolidation loan so that you can convert your debts into one loan payment. Sometimes, banks and credit unions may even offer low-interest rates.
3. Pay on time for future bills
According to Krittin Kalra, the founder of Writecream, you can raise your credit score by paying your card balance in full each month. This will help build your score and establish a positive credit history.
4. Keep credit utilization below 30%
Freddie Huynh, the Vice President of Data Optimization at Achieve, offers a unique tip to improve your credit standing. According to him, you should minimize the percentage utilization of your credit card.
For example, if you have a credit card with a limit of $10,000 and you owe $3,000 on it, that's 30% utilization. Because credit card utilization can be influential in calculating credit scores, keep it as low as possible.
5. Keep your oldest credit account open
Even if you’re not using your old credit card, don’t close it because it can help your credit score. It raises your available credit and keeps your utilization ratio within the ideal range.
6. Avoid constant hard inquiries on your credit
A hard inquiry affects your credit because they show that you may have acquired a new debt. According to FICO, it will decrease your score by five points. So we recommend only applying for credit when you need it.
We recommend following the above-mentioned tips from experts, so you can raise your score to the exceptional category.
What’s the policy on repossession during Covid?
Some lenders have paused repossession due to the pandemic, but other credit unions continue with it despite the health and economic crisis.
So if you’re worried that you won’t be able to make your next payment, the Federal Trade Commission (FTC) has given some suggestions.
First, you can contact your lender immediately and renegotiate your payment schedule. Some creditors will understand your reason because almost everyone is affected by the pandemic.
Second, research the rights you have in your state. Each state has its rules on repossession, so make sure your lenders obey such guidelines. They may have to pay damages if they don’t follow these regulations.
Third, you can also refinance your loan. If you find a credit union offering a lower interest rate, you can take advantage of its offer. Take note that it might affect your score initially, but it can help you in the long run.
Is it possible to improve credit standing after a repossession?
Despite its negative effect on your credit report, you can still raise your score after a repossession. It’s also possible to remove it from your report by filing a dispute or negotiating with the lender.
After the repossession, review your credit report, pay outstanding debts, keep your credit utilization below 30%, keep old accounts open, and avoid hard inquiries on your credit file.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
