Forget about the embarrassment of having your car repossessed. Or the annoyance and frustration of trying to find replacement transportation, because the biggest challenge is the damage it does to your credit score.
Yup, a repossession is one of the worst items to have on your credit reports. And it’s going to dramatically lower your overall credit score. However, like most things in life, there is hope, and you’re not locked in a bad credit prison.
How Long Does a Repossession Stay On Your Credit Report?
Repossessions can stay on your credit report for a maximum of seven years. And this seven-year time window begins with your original missed payment with the original lender, bank, or creditor.
In other words, this time window started long before your car was physically repossessed. And while this mark will significantly damage your credit score, many folks see over a 100 point drop, as the item ages and gets older it will have less impact on your credit score.
Can You Be Sued For a Car Repossession?
So this is how the process works, obviously, as you surely know by now, they’ll come and physically repossess the car. The next step is to resell it, the idea is to recoup the balance on your loan.
If you still owe for example $20,000, and the car is sold after repossession for $16,000 then there would be a deficiency balance of $4,000. And you can bet your britches, the bank ain’t just going to forget about it, or let you off the hook.
In fact, they have this process down to a science. Frequently, they’ll send the collection rights of this $4,000 auto deficiency to a third-party collection agency. This debt collector will, of course, begin calling you.
Sending demanding letters, and they’re going to report more negative information on your credit reports. If they’re unable to collect payment, they very often will file a civil lawsuit against you.
Yes, you got that right, they’ll sue you in a civil court for the balance. This can lead to a judgement, which will obliterate your credit score, even more.
And depending on your state of residence this can result in wage garnishment, liens being placed against you and or your property, and even asset seizure. For full details, investigate your local legislation, because every state has unique laws.
Two Ways To Remove Repossessions From Credit Report Files Before Seven Years
There’s two ways to remove repossessions from credit report files, and before seven long, expensive, and embarrassing years. You can work out to repay the outstanding balance with the original lender, or collection agency, following our guidelines.
And second, you can dispute your credit report. And some folks will need to do both, before getting a clear credit history.
1. Dealing with Debt Collectors
When you first start being contacted for payment, regarding this auto deficiency balance, it’ll likely be from a collection agency. And you need to know, there’s some very clear-cut rules for the debt collection industry.
These are laid out in the Fair Debt Collection Practices Act (FDCPA). This federal legislation is supposed to regulate the industry. In short, debt collectors are supposed, to be honest, and give you the respect and dignity that every human being deserves.
The very first step when dealing with debt collectors is to request debt validation on your account. Essentially, we’re saying prove this is a legal, and legit debt, and my account before we even discuss payment.
This is your consumer right granted by the FDCPA. And it’s most effective to make this request in writing and send it using certified mail, with return receipt requested.
You see, they’re required to respond by providing you with the documents, and paperwork that does prove this is your debt. This paperwork should show the original lender, dates of account activity, balance, etc.
If they fail to validate your account, then in compliance with the FDCPA, the debt is legally forgiven. As in you’re no longer legally responsible for payment. Further, they’re supposed to contact all three credit bureaus to have them get collections removed from credit report files, regarding this account.
On a sidebar, this is the collection item on your credit report. The auto deficiency debt, not the initial repossession item, at this point in our article this is still a separate matter.
Much like it’s a separate item on your credit reports. The repossession mark on your credit reports is reported by your original lender, not the collection agency.
If your auto deficiency collection account is validated, you’ll receive the paperwork, and we next want to review this in detail. We’re looking for your date of last account activity.
Listen, in our great country, our so-called elected representatives have passed laws that say you’re not legally responsible for repayment of most debts forever. This is legally, not necessarily morally or ethically, just legally. And much the same as we no longer use debtors’ prisons.
This legislation is called the statute of limitations. This is a state law, and does vary, so investigate your local listings. This is the legal time window the debt is valid and you’re legally responsible to repay.
Generally, this time window is about seven years from the first date of delinquency. Keep in mind, this first date of delinquency happened with the original creditor, not when the collection agency got the rights to your collection account.
Once this time window expires, then the debt is legally forgiven. The one way to avoid this account from expiring under the statute of limitations is to have account activity, like making a payment, heck even acknowledging the debt with collection agencies is often viewed as account activity.
The statute of limitations applies to auto deficiencies, along with so many more types of consumer debt including credit cards, medical debt, retail, telecommunications, utilities, and many more. The few exceptions include defaulted federal student loans, and federal income taxes.
One of the dirty and often illegal debt collection industry tactics is to re-age consumer accounts. For obvious reasons, they can continue to attempt to collect payment. Despite your legal obligation ending with the statute of limitations time window expiration.
If your collection account is valid, and within the statute of limitations, the next step is to negotiate directly with the collection agency. And it’s wise to get all your communications in writing, so you have evidence, just in case.
There are two essential keys with this step, first always negotiate to settle for less than the total balance. This way you’ll be paying off debt in collections for just a fraction of the total. This is standard operating procedure, and they’ll be happy to accept a settlement for less.
The exact amount you’ll be able to settle for will depend on the age of your account. As in how old is the debt? Along, with the amount, and who else if anyone has previously had the collection rights to your account?
The second part of your agreement is mission critical. In exchange for your payment, you must get the collection agency to agree they’ll stop reporting your account information to all three credit bureaus.
Because in the next step we’ll be discussing how to dispute credit report items, this is how to remove collections from credit report. And it’s also how we’ll remove the repossession mark from your credit reports, by using the dispute process.
If your collection account happens to be serviced by the original creditor. For example, if you had a Nissan Maxima that was repossessed, with our earlier example of a $4,000 auto deficiency balance.
And this deficiency balance is being collected by the same original Nissan lender. Then in exchange for your payment, you’d also want to get them to agree to stop reporting the repossession item to the credit bureaus too.
Most often, auto deficiencies are serviced by third-party collection agencies. However there are some exceptions, and if this is the case, it simplifies our process. In short, you must get the collection agency to agree to stop reporting your account information to the credit bureaus, in exchange for payment.
2. How To Remove Repossession From Credit Report
This second method of removing a repossession from your credit report is using more of your rights as a consumer. Specifically, those rights granted by the Fair Credit Reporting Act (FCRA).
This federal legislation, passed way back in 1970, is what enables you and me to challenge any item, using the dispute process, on our credit reports. So long as we believe the item is made in error, misleading, or incorrect.
We’re going to dispute the repossession item on your credit reports. And assuming you also have an auto deficiency balance, we also want to dispute the collection item too.
There’s three ways to dispute credit report items: online, over the phone, and by mail. Once the credit bureaus get your dispute, and deem it valid, which is another conversation for another time and place, so make sure to sign up for our free newsletter for more credit help and join our congregation.
Once the credit bureaus find your dispute valid, they’re required to investigate the item. During which they’ll contact the company, collection agency, also known as data furnisher that’s reporting the account information for verification.
If an item can’t be verified, then in accordance with the FCRA, it must be removed from your credit report. Specifically when you dispute the repossession item, and the credit bureaus investigate, they’ll contact the original lender for verification of the account.
Using our earlier example, this would be the Nissan finance company. The credit bureaus must have the repossession item verified to comply with federal law, and for it to remain on your credit report.
The good news is this finance company doesn’t have much incentive to verify your account. Especially, if they’ve already sold the collection rights to your account to a debt collector, and or if the debt has already been paid.
Further, the finance company has already used your account as a tax write-off. In other words, there is nothing to gain for the finance company to verify the repossession.
They’ve already gotten everything they can from the account. And even just employing man-hours to verify the repossession, is only an expense. This also applies to the auto deficiency debt in collections.
If you’ve followed our guide above for dealing with collection agencies, after you make payment. Next, we want to dispute the collection item directly with the three credit bureaus.
Because when the credit bureaus investigate this item, they’ll contact the collection agency for verification of the debt. As per your settlement agreement, the collection agency won’t verify your account during the credit bureau’s investigation.
As such the collection item must be removed from your credit reports. This is how to clean up your credit report dings, blemishes, and remove negative items.
In sum, it’s very possible to remove a repossession from credit report files, and long before seven years. The big takeaways are to take action addressing the auto deficiency debt. And convincing the credit bureaus your dispute is valid, and they need to investigate the item.
Did you know the credit bureaus are for-profit businesses? It’s true, you can buy stock in two of them today. And did you know for the credit bureaus to investigate and even correct the most obvious of errors on consumer credit report’s, it’s only an expense?
This is why Congress felt it necessary, decades ago, to pass federal law requiring the credit bureaus to do this. However, many critics would argue the credit bureaus still don’t comply with the FCRA.
They’ve been fined time and time again by our federal government for violating consumer rights under the FCRA. Along with individual consumer lawsuits. And most notably in 2015 all three credit bureaus collectively agreed to settle and pay $6 million for allegedly violating consumer rights under the FCRA with 31 state Attorney Generals.
If your goal is to improve your credit score, an apt analogy for your credit score, is it’s like your Grade Point Average (GPA) in school days past. It doesn’t matter if you’re acing all your courses, if you’re failing underwater basket weaving.
Because this negative mark is going to decimate your overall GPA. This is also true of your credit score, and why it’s so essential to clear credit report dings, blemishes, and remove any negative items.
We encourage our members to consider professional, legal, and legitimate credit repair companies to help. Because in 2016 alone, over 9 million negative items were removed from consumer’s credit reports.
One of the best firms is The Credit Pros. They’ve helped client’s successfully remove repossessions, collections, late payments, charge offs, judgements, liens, and so many more negative credit report items.
Get a free credit consultation with a certified FICO professional by calling toll-free 1-877-418-7596. And for more tips, techniques, and strategies about how to fix my credit score with Dan Willis, sign up for our free newsletter and join our congregation.
Get a FREE Credit Consultation