When Will a Car Repossesion Go on Your Credit?

Late Payment Reporting

Potential creditors can view your payment history for your car loan account. Even if your vehicle repossession is not immediately reported to the credit bureaus, it is obvious to creditors that your vehicle will repossessed soon. Your credit report, as viewable to businesses, reports the number of days your account is past-due. Additionally, if you're trying to pursue another line of credit or a loan, it is unlikely you'll be approved while your account payments are outstanding. Most lenders require accounts such as personal loans, car loans and mortgages to be current.

A vehicle repossession is reported to the credit bureaus within days. The account reflects whether your vehicle was voluntarily or involuntarily repossessed. A voluntary repossession occurs when you arrange to bring the vehicle back to a bank-specified location for its return. If your lender hires a repossession company to collect the vehicle, your credit is updated to reflect an involuntary repossession. Either type of repossession has the same effect on your credit report.

Once your vehicle is repossessed, your lender resells the car. Once resold, the lender will send you a bill for money due if the car's sales price did not pay off your loan balance. You may make payment arrangements to satisfy the account balance or settle it for less than the amount due. Your credit report will reflect your payment type once the account is paid. If you settle the account, it will read as "Settled" on your credit report. The account will read as "Paid" if you pay the total amount due. Regardless of payment, the repossession remains on your credit report.

Expect your credit score to drop substantially once your repossession is reported. The negative account will remain on your credit report for at least 7 years. During that time, you may find it difficult to obtain a loan or end up paying higher interest rates if approved for another line of credit. If your repossession was recent or your account is seriously past due, you are unlikely to obtain another car loan immediately.