What is a Repossession?

A repossession or repo refers to a financial institution such as a bank, taking back an object that was used as collateral in a loan.

Repossession is an action in which the party having the right of ownership (Bank) of the property in question (Vehicle), takes the property back from the party which has the right of possession (Consumer).

The property is then sold by the financial institution.

If there is a deficiency in the balance (the amount of money the bank was able to sell the vehicle for is less than the amount owed on the debt), the balance may continue to report as an active past-due debt on the consumer’s credit reports.

Types of Auto Repossessions

There are two types of repossessions: voluntary and involuntary.

A voluntary repossession is when the borrower voluntarily gives the car back to the lender.

An involuntary repossession is when the lender has the car repossessed without the borrower’s consent.

Both types of repossessions negatively impact a credit score.


Outstanding Loan Balance After a Vehicle Repossession

When a vehicle is repossessed, the lender sells the car at an auction to try and recover as much money as possible.

Unfortunately, cars do not sell for a lot of money at auctions, and this may leave the borrower still owing a substantial amount of money on a vehicle he/she no longer has.

The borrower is still responsible for paying off any remaining balance owed to the lender. The balance owed is reported as an outstanding debt on the borrower’s credit report.

If a borrower owes an outstanding balance after a repossession and does not pay it off, the lender may sue the borrower in court. If the lender wins, a judgment will be placed against the borrower, cementing a legal obligation to repay the debt.

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How Long Does a Repo Stay on a Credit Report?

A repossession may report on your credit file for up to 7 years from the date the repossession occurred.

How Does a Repossession Impact Credit?

A repossession impacts your credit reports and scores in several ways.

First, the lender reports late payments on the account. Late payments of 30, 60, 90 days past due all have escalating negative effects on a credit score.

Then, the account’s status will change to repossession, the status code will change to i9, and the account payment history will start reporting repossession statuses in the payment history.

These updated statuses will do the most damage, as it will show that you had defaulted on the auto loan note and failed to repay your debt, dropping the credit score significantly.

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What to Do After a Repossession?

A repossession reporting on your credit report is obviously going to cause substantial issues to your credit scores.

For most people, the immediate issue is going to be finding another car.

Most auto lenders will be averse to lending you money for a vehicle if you just had a repo. The lenders that may still do business with you will probably charge outrageous interest rates.

Need a car for work or school? It may be worth your while to find a something cheap you can pay cash for.

Is public transportation is an option? That may be your best bet until you can build your credit scores back up.

If you don’t have much active credit you will want to start re-establishing your credit by opening up a secured credit card. Pay your bills on time and carry a small credit utilization. Try stringing together 6 months of perfect payment history and you will see an improvement in your credit scores. has helped thousands of clients improve their credit scores and move on with their lives after a repossession.

We have also helped many clients remove repossession accounts from their credit reports due to inaccurate information and other non-compliance issues.

If you have a repo on your credit report, contact to find out how we can help fix your credit after a repossession and improve your credit scores.

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