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How Long Does a Repo Stay on Your Credit?

6 min read

Published August 20, 2024

Table of contents

Key Takeaways

A repossession is when your lender seizes the property you’re borrowing because you missed a loan payment.
A repossession typically remains on your credit report for seven years.
It’s tough to remove a legitimate repo from your credit report, but you may be able to avoid repossession by negotiating with your creditor before missing a payment.

When you obtain a secured loan or a line of credit, it allows you to borrow against the value of something you already have or are purchasing, like a house or car. The house or car in this case would be considered collateral. Until you’ve paid back the loan, the lender technically owns that collateral. If you’re late on payments, the lender may decide to seize the collateral. The seizure of this collateral is called a repossession—or a repo.

Understanding how repos affect your credit and how you can repair your credit after a repo can help you stay on top of your credit score.

What is a repo?

A repossession is when a lender claims your property because you defaulted on your loan. Typically, a creditor repossesses your vehicle or other financed collateral if you don’t make a monthly payment on time.

According to the Consumer Financial Protection Bureau (CFPB), a repossession remains on your credit report for around seven years after the first late or missed payment has been reported to the three credit reporting agencies.

It’s important to understand that the exact rules for repossession may depend on the laws in your state. It’s possible that some lenders may notify you of your late payment and request the missed payment before repossessing the property. They may offer you the chance to pay or extend a grace period. However, the Federal Trade Commission (FTC) reports that in some states, once you're in default, a car lender can come to your property and take the car without letting you know first. If your car is at risk of repossession, you should look up the repo laws in your state.

How does a repo work?

Lenders may repossess your car or another property depending on the terms of your loan. However, repossession works differently based on the collateral. Two major types of repossession are car and home. While both are procedures that a creditor may use to reclaim property that you’ve defaulted on paying for, a car repo is an actual repossession process. The process of home foreclosure, however, is a different one.

State laws play a huge role in determining how auto repos play out. The FTC explains that in some states an auto lender can repo your car without giving you notice, but they can't use force or the threat of force to get the car back. Once the creditor seizes your car, they may either keep or sell it. The seizure of your car from your property is called involuntary repossession, but it's possible to choose a voluntary surrender instead, according to the FTC.

If you voluntarily repossess your car back to the lender, it may reduce the fees you pay, but you’re still responsible to fully pay back the difference between what you owe and what the lender resells the vehicle for. The lender may still report this activity to the credit bureaus.

The process of home foreclosure is more complex than car repossession. The U.S. Department of Housing and Urban Development (HUD) explains that while the process of foreclosure varies from state to state, mortgage companies generally begin the foreclosure process around 3-6 months after a missed mortgage payment. Lenders are required to notify the borrower of the foreclosure proceedings. Once the properties are auctioned, however, the borrower is given time to find another place to live before they must leave the home.

How can a repo affect your credit?

The most important category that makes up your credit score is your payment history. Since a repo indicates that you missed a loan payment, it can negatively impact your credit score. Not only can a repo result in a ding to your credit score, but it’ll also take seven years to fall off your credit report. If you see a repossession on your credit report more than seven years after the original delinquency date, it's a good idea to contact the credit bureau and ask them to remove it.

Did you know?

Some creditors can help you stay on top of your credit score. Being a Discover^® Cardmember means that you get a free Credit Scorecard with your FICO^® Score and important information behind it, like credit utilization, number of missed payments, number of recent inquiries, length of credit history and total number of accounts.¹

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Can you remove a repo from your credit report?

Once a repossession is on your credit report, it’s tough to get rid of it before the seven-year period unless it’s a wrongful repossession. If you believe a repossession on your credit report is wrongful or inaccurate, you should file a dispute with the credit bureau and ask the creditor to reevaluate your account.

To show good faith to your creditor, don’t wait until your property is being seized before trying to get them to work with you. Let them know you’re unable to make a payment as soon as you’re aware and see if you can work out a repayment plan with them.

Securing a written confirmation is important when you work with your lender to update your loan contract. The CFPB suggests that if the lender offers to accept the vehicle in exchange for loan forgiveness, you should get the agreement and whatever terms are being updated in writing.

How can you repair your credit after a repo?

If a creditor has repossessed your car and you can’t get it removed from your credit report, you should focus on working to repair your credit. Prioritize making timely payments on all your credit accounts, even if it’s just the minimum payment. Try to keep your credit utilization low by paying down any outstanding balances. Using your credit card responsibly can help you improve your credit over time. Avoid applying for new loans or credit cards right away, as hard credit inquiries may further affect your credit score.

Repossession can be a frustrating experience, so try to avoid it altogether by making timely payments and maintaining an open line of communication with your creditor. If you believe your creditor has unlawfully repossessed your vehicle, you should contact a lawyer to better understand your rights.

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