Best Credit Repair for Repossession

The repossession of an asset such as a vehicle will have a negative impact on a credit rating. This will in turn result in a bad credit score that could have the following negative consequences:

  • Difficulty or inability to be approved for loans, finance or credit.
  • The inability to rent or lease property.
  • Challenges getting a job or employment.
  • Studying at certain tertiary education institutions.

In general, it will reflect badly on the character of a person and therefore impact their entire life. But what is a repossession and how does it work?

What Is Repossession?

Repossession is the process of removing an asset from a person who has defaulted on their agreement to pay for the asset through a loan, credit facility or other form of finance. In other words, when repayments are not made according to the terms and conditions of the loan agreement, the asset is seized by the lender in order to recover their losses. The asset therefore stands as collateral or security for the loan.

This is most commonly seen in the auto industry where vehicles are often repossessed due to failure to repay the car loan or vehicle finance. Repossession is most likely to occur where repayments have not been made for a period of 3 months or more. However, under some circumstances, repossession can take place after just one missed payment.

How Does Repossession Affect A Credit Score?

Firstly, the failure to make payments that resulted in repossession will be reflected on a credit record and have a negative impact on the credit score. Secondly, the fact that a vehicle or other asset was repossessed will also be reflected on the record for anyone running a credit check to see.

Missed payments, late payments and a repossession do not reflect kindly on the ability to pay future debts and will also negatively impact a credit score. This said, there are two types of repossession, each of which will affect a credit record differently:

  1. Voluntary repossession where the vehicle is voluntarily surrendered to the lender when there is a realization that the financial obligation can no longer be met or that the repayments have become unaffordable. This is beneficial in three ways – one, there will be no reflection of non-payment, incomplete payments or late payments on a credit record. Secondly the repossession will be listed as voluntary. Creditors and other people running credit checks are likely to react more kindly to voluntary repossession. Last, the fees and additional charges associated with repossession can be avoided.
  2. Involuntary repossession is where a vehicle or asset is taken without permission and sometimes knowledge of the person who has defaulted on their loan agreement. This step is however only taken after multiple attempts to contact the person and to remedy the situation. Commonly, the person will be given time to make the repayments in an attempt to avoid repossession. Repossession is a last resort to recover finds from a loan or financial arrangement that has gone into default as the lender more often than not does not sufficiently recover their losses.

How To Repair A Credit Record After A Repossession

It is important to take steps to have repossession removed from a credit history as soon as possible in order to repair the record and improve a credit score. There are a number of different ways in which this can be achieved:

1. Wait For It To Be Removed

Most credit bureaus or agencies will automatically remove a repossession from a credit record after a specified period of time has passed. This time period is normally 7 years from the date that the repossession was listed or when the first payment was defaulted on.

This is however a significant period of time to wait and the repossession will continue to impact the ability to apply for finance, credit or a loan during this period as well as affecting other areas of life.

2. Renegotiate Terms

It is still possible to attempt to remedy the situation after a repossession has already taken place. Contact the lender or institution with whom the financial arrangement has been made and ask if they are willing to renegotiate the terms and conditions. Extending the repayment period (term) can reduce the amount of the repayments that need to be made thereby making the financial arrangement more affordable.

However, this will need to be done as soon as possible after the repossession before the vehicle is sold to recover costs. Also, most lenders are not willing to renegotiate after a repossession. They are far more willing to make new arrangements for repayments to avoid a repossession so this is a good strategy to avoid a repossession rather than repair the problem after it has occurred.

3. File A Dispute

This is only if the repossession never occurred or was in error. In order to have the repossession removed from a credit record, it will be necessary to file a dispute with the relevant credit agency. Evidence or proof that the repossession was in error or never happened will need to be provided. This can be in the form of a letter from the relevant lender or a court order. A repossession that was recorded in error should be removed by the relevant credit agency without delay once the matter has been investigated and the error confirmed.

4. Credit Repair Services

It is possible to enlist the services of a credit repair specialist or a lawyer to have the information regarding the repossession deleted from a credit record. These experts have the knowledge and the skills to improve the chances of having the information removed. However, it is important to note that they will probably take the same steps to have the record changed. A lawyer can carry some clout in these situations.

Also, there is no guarantee that the credit repair service will be successful and they will charge a fee, regardless of whether the repossession is removed or not.

At the end of the day, it is always better to protect a credit record and take steps to avoid penalties rather than attempt to remedy the situation after a repossession has already taken place.