Redeeming a Repossession: Impact on Your Credit Score & Recovery

A repossession hurts your credit score even if you redeem your car.

Your lender sometimes returns a repossessed vehicle to you, known as redeeming a repossession, if you meet certain terms. Most creditors want payment in full before they turn the car back over to you, but some give you another chance if you catch up the payments and reimburse all repossession-related expenses. The repossession stays on your Experian, Equifax and TransUnion credit reports and lowers your credit score, even if you get the car back, unless you get it removed from your records.

Step 1

Print three separate copies of all the paperwork related to your repossession and the redemption. You must find discrepancies between your paperwork and credit reports to get the repossession removed from your records and stop its credit score influence. You need one copy of your records for each of the three credit bureaus.

Step 2

Order your three credit reports through AnnualCreditReport.com. Experian, Equifax and TransUnion collaborate on the site and send out free credit reports yearly upon request, as required by federal law. Your repossession will appear on all three reports, although the information might vary slightly because the bureaus are unrelated companies and compile their data independently.

Step 3

Compare the repossession entries on your three credit reports with your records. Federal law gives you the right to dispute all mistakes, including minor data errors, on your credit reports. Repossession companies often slip when calculating or reporting towing charges, storage fees and other expenses, Carreon and Associates advises. You can use anything, from a misreported amount to a wrong date, to challenge the repossession entry on your reports.

Step 4

Write to each credit bureau, pointing out the errors in the repossession data and requesting removal of the entire entry. Attach a copy of the paperwork to prove that there is really a mistake. Federal law requires erasure of erroneous credit report entries unless the company that provided the data proves that it is correct. Find the current credit bureau addresses on their websites and use certified mail with receipt requested so you know your letter delivery dates.

Step 5

Recheck your credit reports when corrected copies arrive. The Fair Credit Reporting Act gives the credit bureaus 30 days to handle your disputes, so you should get the results and new report copies shortly after that period expires. The repossession loses its influence on your credit score as soon as it drops off your credit report reports.

Tip

Your repossession stays on your credit report for seven years if you cannot get it removed through a dispute, and it hurts your credit score for that entire period. You reduce its influence by rebuilding your credit in other ways, like keeping the car payments up to date, always paying other bills on time and keeping credit card balances down. These activities improve your credit score within 12 to 24 months, according to Bankrate writer Vanessa Richardson.