What is the Best Way to Repair Your Credit After a Car Repossession?

If your car has been repossessed for non-payment, your credit score has likely already suffered greatly due to the late payment history. Even worse, once a loan account is labeled as repossessed, your credit score will take an even bigger hit and the item will remain for any prospective lender or employer to see for up to seven years. Fortunately, a credit score can survive repossession and over time, with proper behavior, your credit score can be repaired.

Redeem the Repossession

If it is financially possible, make an effort to redeem the repossessed car before it goes to auction. A redeemed repossession looks a lot better than a straight repossession on your credit report. Additionally, when the car is sold at auction, the proceeds may not be enough to pay off the remaining car loan balance and having a delinquent balance, collection item or even a judgment will do further harm to your credit score. Working with the creditor to redeem the car or to negotiate a settlement on any past due amount can lessen the impact of this event on your credit profile.

Dispute Erroneous Items

A repossession presents a strong motivator for you to obtain and review your credit report. You will want to challenge any inaccurate information on your report for the repossessed automobile account as well as any other credit accounts. If you can find any information that is erroneous, you may be able to have that comment removed or the entire negative item deleted from your report. Challenge the date of the late payments, the total available amount of the loan extended and other items that you can challenge factually.

Manage Other Accounts Responsibly

Now that you have seen the damage a repossession can have on your credit score, make every effort to keep all other credit and reporting accounts in good standing. For each month you remain in good standing, the impact of the repossession is lessened and your credit profile slowly starts to rebuild. Additionally, other creditors will see the repossession on your account and may be inclined to close your accounts at their discretion. Ultimately, this is out of your control, but do not make it easier for them to decide by falling behind on other accounts. Your remaining credit accounts are lifelines to rebuild your credit profile.

Establish New Credit

Obtaining new credit after a repossession is difficult. However, there are many lenders that specialize in high-risk loans and credit lines. Secured credit accounts where you place funds on deposit with the creditor are mechanisms that can be used to rebuild your credit profile. While it is not advised to go out and try to get new credit for the sake of having it, when you need it, be prepared to be treated as a high-risk consumer and make some sacrifices to obtain the new loan. With good payment history on these types of loans, you should be able to move your way back to the bucket of consumers that can obtain credit without such stringent requirements.