How to Fix Your Credit After a Repossession
Imagine! If you are all set to go to work, and suddenly you’re out of those 4 wheels you owned? That’s the nightmare of repossession!
“Repossession” refers to the seizure of your property by bank or financial institutes in case of non-payments.
And, If you’ve already been through that…. This article is for you!
We’ve brought some tips and tricks so that
- You can fix your credit after a repossession.
- Find out! Why can the police or lenders repossess your car?
- And when is the best possible time to contact a credit repair services company to repair your credit?
So, let’s dive in!
What Is Repossession?
When you finance a car through an auto loan- the ownership is not completely transferred to you. Instead, it remains with the lender. This means you’re giving him the authority to POSSESS your assets in case of missing the next due date.
This seizure of your property is known as“ Repossession,” and it can happen without even a warning!
Repossession laws vary from state to state. Yet, most of the time, the lender allows 10 days or above before seizing the defaulter’s possessions. Any item that can be used as collateral can be considered for repossession. It includes furniture, electronics, or vehicles but generally the term is for cars.
How Repossession Works?
To understand the process, we should be aware of its types first:
- Voluntary Repossession
- Involuntary Repossession
Voluntary Repossession
When a borrower hands over his car to the lender because he can no longer afford the installments. Also, he cannot bear any charges due for missing payments.
In Voluntary Repossession
In this scenario, a lender forcefully takes the assets back to secure his loan amount. In this case, the will of the borrower is not taken.
No matter what option you choose. In both cases, the property is sold out in an auction. The lender gives the remaining amount back to the borrower after deducting expenses such as- storage, auction costs, and attorney fee.
What are The Effects Of Repossession on Your Credit Score?
Most of the time repossessions reduce your score from 50 to 150. Which means probably if you had 700 earlier , now it is dropped down to 550. This situation can badly affect your ability to secure loans and negotiate favorable interest rates with your lenders in future.
It also affects your credit history in the following ways:
Negative Repute due to Missing Payments
The finance company or auto lender reports a negative score on your behalf which declares you defaulted for missing payments.
Defaulter
Instead of reporting it as late or missing payments, the finance company reports that you defaulted on a car loan. Which is even worse because it can block all your chances to apply for a car loan in future.
Collections
Once the assets are possessed and sold in an auction, and if the balance still remains- the collection agency will count it as a bad debt. In case of non-payment, your score is negatively affected.
Steps to fix your credit after a repossession
Check Any Errors In Your Credit Report.
Get a free copy of the credit report from 3 major bureaus, Equifax, Experian, and TransUnion. Check, if there are any invalid errors in the report- then raise a dispute.
Pay Your Bills on Time- If Possible.
Once your asset is repossessed, the most effective way to build your credit again is on-time payments. Instead of paying the minimum balance, try to pay as much as possible to get a better score.
Lower Credit Utilization
Though a credit card is one of the best facilities you can use to build a credit history. However, it is recommended not to use more than 30% of your credit limit. Try to keep your utilization as low as possible to avoid any liability in future.
Get Away With Huge Debts
If you have any credit cards that cost you huge debts, you need to STOP using them ASAP. Pay off the balances, and get rid of the cards.
Do Not Apply for New Credit
Do not apply for credit if you don’t need it. Applying for new loans frequently also affects your credit scores.
Repossession for Years!
You can’t remove the stigma of repossession on your credit report for 7 years. Yes, this is upsetting because you might not be able to apply for loans and mortgages in that term. But, it doesn’t mean that you should stop trying.
Make your score better- build a positive reputation and get your chances again to get mortgages and loans in future.
Consider a Secure Credit Repair Services
The process is a bit tricky, but fear not, you can always count on Credit Max Solutions to build your credit again. No matter, if an asset is repossessed or you’re failing miserably while building a positive reputation- we can be your roadmap. Our expert team members are always here to help you! Contact us by sending an email at: info@creditmaxsolutions.com and get a free credit evaluation online TODAY!
