Look at your credit report and see what is actually reported

There are a few things worth knowing about repossessions.

• The auto loan will be reported as an account that has been “repossessed” or “voluntarily surrendered”.

• The deficiency will also be reported. The deficiency is the amount of money that is still owed on the account after the auto was sold at auction. The deficiency will be reported as “charged off” and sold to a collection agency.

• Since the deficiency has also been “charged off,” the collection agency will report a collection account for the deficiency as well.

• Therefore, to “remove the repo from your credit,” you must also get the collection account for the deficiency removed as well.

The Seven-Year Clock, and When it Truly Begins

According to the Fair Credit Reporting Act (FCRA), how long does a repossessed debt appear on your credit report? The answer is the same as any other kind of debt: the credit reporting clock begins when you first make a payment that is past due, and continues for seven years. 

Repossession doesn’t play a part in the clock. Nor does selling the debt to a collection agency. It is understandable that most people believe the credit reporting clock begins anew when the debt is sold to a collection agency, but that is not the case. If a debt collection agency is trying to collect a debt by reporting a date that resets the clock, they are breaking the law. In that case, you are warranted in disputing that collection activity.

Option 1: Dispute Inaccurate or Unverifiable Information

Accurate information can only be disputed using this method early on. It is successful if there are problems with the information. Common issues that allow for a legitimate dispute:

• Incorrect dates, especially the first delinquency date

• Amounts reported do not match the loan documents.

• More than one reporting of the same repo

• Debt is reported as collected, but the lender is unable to verify the debt.

You are permitted to dispute information on your own, and the credit bureaus are required to investigate the disputes. You can have the negative information removed by the credit bureaus for free.

Option 2: Goodwill deletion request

A goodwill deletion request can be submitted to a lender requesting that the negative information be removed because of the circumstances that led to the repo. A goodwill deletion request can be submitted to any lender and is most likely to be granted by a smaller lender. A request can be denied by any lender, and there is no requirement for the lender to remove the information.

Option 3: Pay-for-Delete Negotiation

Some collection agencies and lenders are amenable to removing negative information if a goodwill adjustment or payment is made to a related collections account. Generally, collection agencies are less amenable to modifying the negative information related to the repossessed vehicle. Here are some things to know about this strategy:

• Get any modification in writing. Verbal agreements are not enforceable.

• This strategy is more effective against the collection agencies that acquired the debt, as those agencies have a greater ability to adjust the debt to reflect the terms of the goodwill adjustment.

• Some agencies prohibit employees from modifying the collection records and will not remove negative information, regardless of what a collection agent says.

Option 4: Let it age off naturally while rebuilding around it

Though time will eventually remove the repo from your report, you can also take steps to improve your credit score during this time by using other credit facilities judiciously. You should aim to improve your score by:

• Maintaining a track record of on-time payments.

• Keeping a low balance on your credit cards.

• Using a secure loan or credit card to improve your payment history.

• Not closing credit accounts.

Option 5: Work with a credit repair company

While this is an option available to you, you should take note that, in most jurisdictions, you have the right to request that credit reporting agencies remove inaccurate information from your credit report, at no cost to you. Further, you can initiate dispute resolution procedures yourself. Credit repair companies are unlikely to take on your case unless you are seeking to remove numerous negative credit report items.

In the case that you wish to engage a credit repair company, you should understand that the credit repair company you engage can do the following:

• Contact credit reporting agencies to lodge disputes on your behalf

• Contact creditors to lodge disputes on your behalf

• Contact creditors to request that they remove inaccurate information from your report.

What won't work and may make things worse

• There’s no way to get a truly clean credit slate. Using a Social Security number as a “Credit Privacy Number” (CPN) is credit report fraud.

• Disputing an accurate repo claim is bad faith and may be reported as frivolous. Repeated frivolous disputes may increase the time it takes to resolve disputes you may make for valid claims.

• You can’t eliminate a deficiency balance by ignoring it. It may still be collected by the creditor and, in some cases, lead to a civil lawsuit.

Frequently asked questions

Will I be able to remove a repo if the lender has a right to repossess the vehicle and I was behind on payments?

Yes, a repo can be removed if the lender was correct to repossess the vehicle and the debt was valid.

Does paying off the deficiency balance improve my score immediately?

Accuracy is determined on a case-by-case basis, and usually only adjustments are made for clearly verifiable factual errors. Your other options are a goodwill deletion, pay-for-delete, or waiting for the 7-year mark.

Will my score immediately improve if I pay off the deficiency balance?

Paid collections are weighted less than unpaid collections in some scoring models so that it may improve your score in those models, but it will not remove the collections. If a deletion is agreed upon, then the collection would be removed.

Will a voluntary repo be reported differently from a voluntary surrender?

They will always be negative credit reporting and impact your score. There are different ways lenders code the credit event, but it's not a way to avoid credit score impact.

How much do you think a repo will impact my score?

Depends on your score and overall credit situation. A score in the high 600s may not be as negatively impacted as one in the low 800s.