How Much Can a Car Repossession Hurt Your Credit Score?

A vehicle is one of the most important assets you can have, especially if you live in a city without a robust public transportation system. Unfortunately, vehicle prices have risen steadily, leaving consumers paying an average of $738 per month for their new cars.

With prices so high, it’s easy to get behind on your monthly payments, putting yourself at risk of a repossession. Read on to learn how much a car repossession will hurt your credit.

What Is a Repossession?

An auto loan is a type of secured debt, which means it’s backed by collateral. In financial lingo, collateral is a valuable asset used to secure a loan. If you don’t pay the loan as agreed, the lender has the right to take back—repossess—the asset, sell it, and use the proceeds to cover your debt.

A lender usually has the right to repossess your vehicle after a single missed payment, but it may give you up to 90 days to catch up. If your lender gives you extra time, do whatever you can to avoid the repo. Work more hours, pick up a second job, or borrow money from a family member.

If you don’t submit the full amount due by the cutoff, your lender may have a repo company pick up the vehicle. Repo agents, also known as recovery agents, use a variety of tactics to repossess vehicles. For example, a repo company may send a tow truck to your house and have the vehicle towed away when you least expect it.

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    How Much Will a Car Repossession Hurt My Credit Score?

    A car repossession itself doesn’t hurt your credit, but the late payments and collection account that presumably led to the repossession will. The exact impact on your score will depend on several factors, such as how high your score is, what your payment history looks like, and the number of credit accounts you have. If you want to know where your credit stands, check your FICO® credit scores or your VantageScore.

    It’s also a good idea to check your reports from the three major credit reporting agencies. Checking your reports makes it easier to spot fraud and keep track of the negative items on your record.

    How Long Does a Repo Stay on Your Credit?

    Generally, your late payments and collection accounts can stay on your credit report for up to seven years. The good news is that you don’t have to wait that long to start fixing your credit.

    How to Fix Credit After a Car Repossession

    Follow these tips to build a stronger credit profile while you wait for negative items to fall off your credit reports.

    1. Make On-Time Payments

    Payment history is by far the most important factor used to calculate your credit scores. A car repo indicates you have a history of missing payments, but it’s possible to turn things around by changing your behavior. The first step is to figure out why you missed those payments.

    If you missed several car payments due to a lack of income, now’s the time to look for a higher-paying job or think about starting a side hustle. The more income you have coming in, the less likely you are to miss payments in the future.

    Some people miss payments because they’re less organized and have a hard time remembering their due dates. Fortunately, hundreds of tools are available to help you gain control of your finances. Consider setting up automatic payments or using a mobile budgeting app to avoid late payments after a repo.

    2. Avoid Taking on Too Much Debt

    The more debt you have, the more difficult it is to manage your finances. After all, when you use a credit card or take out a loan, you have to pay back what you borrowed. If you avoid taking on too much debt, you’re less likely to have trouble meeting your financial obligations.

    Avoiding excess debt is also a great way to keep your credit utilization ratio in check. This ratio compares how much revolving credit you’re using to your available credit limit. For example, if you have $5,000 of total available credit and you’re carrying a balance of $1,000, you have a credit utilization ratio of 20%. Try to aim for a utilization ratio below 30% to show lenders you use your credit wisely.

    3. Apply for Credit Sparingly

    Another way to improve your credit score is to apply for credit only when you need it. For example, if you’re planning on traveling a lot, you may want to apply for a travel credit card to earn frequent-flier miles or get cash back on your travel expenses.

    If you don’t absolutely need credit, don’t apply for it. Every time you fill out an application, the lender does a credit check, which causes a hard inquiry to appear on at least one of your reports. Too many hard inquiries in a short amount of time is a red flag, as lenders may think you’re in a financial bind and need a bunch of credit to bail yourself out.

    4. Apply for a Credit-Building Product

    The negative items that lead to a car repossession, such as late payments and collection accounts, can have a major impact on your credit, so you may not qualify for standard credit cards or loans for a while. Fortunately, many companies offer credit-building products designed to help consumers recover from financial setbacks.

    For example, some banks offer secured credit cards, which are a bit different from traditional credit cards. With a secured card, you establish a credit limit by making a cash deposit. For example, if you deposit $500, the issuer will give you a spending limit of $500. If you use your secured card responsibly, the bank may convert it to an unsecured card after several months.

    It’s also possible to take out a credit-builder loan, which is like a traditional loan in reverse. Normally, you borrow a lump sum of money and pay it back over time. With a credit-builder loan, you make payments first. Once you’ve made your payments as agreed, the lender gives you the money.

    Your credit won’t recover overnight, but it can improve over time if you develop good habits and manage your finances wisely. To assess how your credit is doing now, see your free credit score at

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