Repossession can definitely prove detrimental to your credit. It’s right up there with bankruptcy and foreclosure in the more serious things that reflect negatively on your credit report. This is one of those scenarios where your credit report shows it for 7 years, and it can seriously affect your ability to get any new credit or financing.
Scenario:
You have a car through a company, and you owe $10,000 on the loan. You default on your loan, and they repossess your car. They sell it an auction for $5,000 – you still owe the remaining $5,000. They will bill you for this remaining amount. This will show up on your credit report as a “repossession,” and you will likely have an additional mark like a “charge off.” Naturally, you will also have various late payments on your account that hit before the vehicle was repossessed. It becomes a multi-layered problem. If the account is paid off, the information will stay for 7 years. If it’s not paid, it will continue to be a growing problem and could even lead to legal action depending on what course the creditors decide to take. (A repossession of a home works similarly).
Any future financial decisions will have to be made with this in mind. Any new credit account or loan will see this as some sort of risk. It will impact your ability to get certain rates, to get certain loans, and even to get certain jobs! It will also inevitably lower your FICO score, so getting additional credit from organizations you already have accounts with could also be heavily affected.
There are times when you can negotiate with creditors if you pay off the debt to see if they will remove the derogatory information from your credit report. You really have nothing to lose by asking. This is always best to do in writing so there is tangible evidence of any agreements and/or settlements made between you and the creditor. If the negative mark is removed from your credit file, your FICO score will improve, and you have a much greater chance of getting more affordable financing and a greater variety of loan types.
