How to Remove a Repossession From Your Credit Report

The “repo man” tops the list of unpleasant and unwanted visitors—only in a narrow margin to those distant out-of-state relatives, of course.

The notorious repo man emits an unpleasant aura. An aura that comes from the fact that his job duty is to repossess your property when you can’t make good on a debt.

While repossession is usually the last resort for most creditors, the possibility of being a victim of the ole repo man is still blatantly present. In fact, due to the current economic crisis as a result of COVID-19, a lot of consumers have recently been face-to-face with vehicle repossessions—and this number is only expected to increase in the new year.

But, as if the shame from losing your property wasn’t enough, what happens to your credit score is also a major pain. Upon repossession, your credit score suffers, making it even harder for you to recover financially…or move on with your life. 😳

Don’t fret just yet though. There’s always a silver lining, and in this case, that lining is that there are possible ways to lessen the blow to your financial future.

One way to get out of this relatively unscathed is to get the repossession removed from your financial report card. Let’s see how you can do this.

What you’ll learn

• What’s a Repossession?
• The Impact to Your Credit
• Knowing Your Rights
• Negotiate with the Creditor
• Dispute Inaccuracies
• Avoid a Repossession

What is a Repossession? 🚗

Due to the slew of pop culture references that depict the act of being “repoed,” you likely get the gist. A repossession is when someone else regains a possession of yours, hence the blended word “repossession.”

In technical terms, a repossession is the seizure or forfeiture of property that occurs as the result of nonpayment of a debt. There are two primary types of repossession, voluntary and involuntary—it’s pretty obvious what the difference between those two is based on their names.

Voluntary repossession is when you offer up your item before the creditor decides to seize it. But, our focus today is going to be on the most common type: involuntary repossession. Involuntary repossession means this seizure isn’t by your choice, but by the original creditor’s. 

It happens when you default or fall delinquent on a secured loan. A secured loan is a loan backed by a personal asset (or collateral). The lender or creditor will then take the pledged collateral in an attempt to recover their loss when you are struggling to cough up the cash. 

Repossessions can happen to the following types of properties:

• Motor vehicles such as cars, motorcycles, and boats
• Rent-to-own items like furniture 
• Any other secured personal property that you pledged as collateral for a loan

You won’t face repossession to a property you haven’t designated as collateral or items you purchased with a credit card. A home foreclosure is also a type of repossession and can occur on both mobile homes and single-family residences. However, the term repossession usually refers to vehicles or rent-to-own items.

How Repossession Affects Your Credit 📉

At the time of repossession, the score on your credit report has more than likely taken a major dip. This is due to a combination of factors that aren’t just the fault of the repossession alone. For one, to get to the repossession point, you would have already had to have missed several payments.

Payment history is the largest category of credit factor, weighing in at 35% according to the credit modeling giant FICO. Late payments 30 days or more past due show on your credit report which will negatively affect your score. According to FICO, you can lose between 50 – 120 points just from one missed payment. 😱

Additionally, a repossession is a derogatory, or negative, mark on your credit report. Therefore, future lenders not only know you were late on a debt, but also that you lost the property because of it.

Lastly, the true cash value of the asset may fall short of what you owe. In this case, a collections agency can pick up the remaining (or deficiency) balance. The collections account will also appear on your credit report as a derogatory mark. You guessed it—this in turn lowers your credit score.

You then not only have to tackle the repossession and the original creditor but now the hard-to-deal with sharks from the collections agency will be breathing down your neck as well.  Fortunately, you can deal with collectors if you know what you are doing and how they operate.

The final tidbit is that seven is the magic number with most credit factors. Late payments, collections, and a repossession remark will all stay on your credit report for seven years. This is unless you can orchestrate the removal prior to the seven-year point.

Know Your Rights ⚖️

To better protect yourself and your financial state, it pays to know the process and what repo men can and can’t do. Plus, you can potentially dig yourself out of a hole if you can recognize an unlawful or improperly conducted repossession.

Repossessions are usually self-serve, meaning creditors can come and take the items themselves without the court’s approval. Therefore, in most cases, the creditor seizes the property lawfully. Like with most things in life, the creditor has to follow specific state-level rules when doing so. 

More often than not, creditors must notify you of delinquency before repossession. You also must be notified upon the sale of your seized item. Think about it, they are seizing the item to recover your debt. So, they better let you know when they put the proceeds from that item towards your debt!

Most states also allow repo men to step foot on private property as long as they do so peacefully. This means that a creditor or liquidator is never allowed to threaten you or use physical force against you in the process of seizing the property. 

If your property is being sold at auction, you may actually have the right to bid on your property.  While it isn’t really optimal, it is a way to get your property back and settle your debts.

To learn about your specific state’s guidelines, the Federal Trade Commission (FTC) highly suggests you consult their resources or your State Attorney General. If you have grounds for disputing an improperly conducted repossession with the courts or your state’s AG, this could end with you scoring your property back or even potentially getting the debt discharged and removed from your record.

Call the Creditor Directly 📞

In most cases, creditors will be compliant with the repossession rules. So, the option that’s the most likely to work is negotiating with the lender or creditor directly. 

You hold a significant amount of power here as you have some solid leverage— you owe them money. Your indebtedness to the creditor gives you negotiating power. Selling your property at auction is a real hassle for the creditor. Plus, it’s unlikely the creditor will be able to recover the full value of the debt from just the sale of your item.

You can offer to pay off the balance of the loan for the removal of the negative repossession mark from your credit. This act is classically known as a “pay-for-delete” request in the credit world. 

You can send a pay for delete request via mail, email or phone, though a written request may be a less anxiety-inducing way of getting your point across. If the creditor agrees to your request, try everything you can to get this agreement in writing, especially before making any payments. 📝

The most difficult part about this tactic can be getting a hold of the right person. It’s possible you’ll have to talk to multiple people at the company and escalate your proposal several times before you have a fish to take the bait. Nevertheless, stay persistent and don’t give up. If you get a no once or twice, it doesn’t hurt to keep trying, so long as you do it in a courteous manner.

You can also get your seized property back using this same process. However, know that you may have to pay all the penalties and repossession/storage fees. You can also negotiate with the lender a more favorable deal, but it’s best to call in an expert attorney if you want to go this route.

Dispute Inaccurate Repossession Entries ❌

Another option for having the repossession removed is by submitting a dispute to the three credit bureaus. To begin this process, you’ll first want to obtain a copy of your credit report. 

You have options for obtaining your credit report. If you have a major credit card or another type of loan account, your servicer may offer you weekly credit updates for free.

In normal circumstances, you can get a copy of your report from each of the major credit bureaus for free annually. But, due to the economic impacts of COVID-19, the credit bureaus are allowing consumers weekly reports through April 2021.

Once you get your credit report you’ll want to study it closely for any inaccuracy. This includes dates, balances, account numbers, and payment amounts or terms. Make sure to check every single detail or get a reputable credit repair company to do it for you. 🔍

There is also the chance you’ll see a repo that isn’t even yours. This can happen due to clerical filing errors or even identity theft. If you find any inaccuracy, you can at that point submit a request for a debt validation or a dispute to the reporting credit bureau. 

The Fair Credit Reporting Act requires the reporting bureau to verify the repossession within 30 days. The entry must either be corrected or removed if truly inaccurate. More often than not, all three major bureaus will have the same information, as reported by the lender. If this is the case, you stand a chance of the entry being completely deleted.

While the study, validate, dispute method is a possible way to get a repossession removed, it is not in any way a guarantee. But it’s definitely worth a shot, right? 🤷

How to Avoid a Repossession 🤞

The best way to avoid the headache associated with personal property repossession is to not fall behind on your payments. Sure, that phrase may be easier said than done, especially in today’s day and age.

The coronavirus pandemic has left millions of Americans without a source of income, and it goes without saying that if you have no income, you can’t make payments.

If you find yourself in this boat, contact your lender ASAP. It’s possible your lender will let you renegotiate a payment schedule or maybe even cut you a break in exchange for a partial payment.

If you are going through a temporary hardship, light job loss, or furlough, they may even allow you to skip payments for a month or two—the real avalanche of repossessions is yet to sweep the U.S., and lenders know this. Remember, they want you to pay up, so they are likely to help you do it if you’re having problems. You never know until you ask.

If you sense struggle coming, consider refinancing your loan for a lower interest rate to make your payment a bit more manageable or consolidating your debt to stretch out the payments and lower your interest. Another option you have, as much as it may suck, is to consider trading or selling the object in exchange for one that is more realistic for your budget. 

The most important thing is communication, as a repossession isn’t a problem that will go away if you ignore it. Admit you need help before you fall too deep into the hole and you may still be able to come out on top. 💪

About the author

Summer Nevins

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Summer is a banking professional and business school graduate turned expert finance writer. Raised in a small low-income town in the southern United States, Summer, like a lot of millennials, learned the ropes of personal finance the hard way. Both her work and life experiences led to discover her true passion for educating others about the complicated field of finance. Summer currently resides in the Greater Nashville Tennessee area with her husband. When she’s not writing, Summer enjoys exploring the beautiful world and hiking all of the challenging trails along the way.