When a repo occurs, it can stay on your credit report for as long as seven years. However, with the proper steps taken, you can bounce back from such an unfortunate event and get your credit score back on track. In this article, we’ll explain how a repo affects your credit, how to fix credit scores after a repo, and how credit repair companies near San Diego, California can help you do it.
What Is a Repo?
A ‘repo’ is short for ‘repossession.’ It refers to a situation in which a lender takes back property, such as a car or house, due to non-payment of the loan. If borrowers fail to make their loan payments, lenders can take back their property to recoup their losses.
For example, if you default on a car loan, the lender may send a repossession agency to take back the vehicle. During this process, they will report the repossession to the credit bureaus—Experian, Equifax, and TransUnion—and this information will stay on your credit report for seven years, making it difficult to get approved for other loans or credit cards.
In the same way, if you fail to make payments on your home, the lender can take legal action and repossess your home. This is known as foreclosure. It can also stay on your credit report for seven years, but the long-term consequences can be much more severe.
How Does a Repo Affect Your Credit?
Your credit score is calculated on the basis of five key factors—payment history, credit utilization, length of credit history, types of accounts opened, and the number of hard inquiries. With a repo on your file, it will be harder for you to get approved for any type of credit, as lenders will take a closer look at your financial history.
Furthermore, if you still owe money after the repo, it will be reported as a ‘charge-off’ in your credit report. This can have an even more significant negative impact on your credit score.
How to Rebuild Your Credit After a Repo
It takes time, but a repo is not the end of your financial life. There are several steps you can take to rebuild your credit after a repossession:
1. Ensure That the Repo Is Accurately Listed on Your Credit Report
You may need to dispute any incorrect or outdated information in your credit report–this can help remove some of the negative marks and improve your credit score.
You may wonder, does disputing a debt restart the statute of limitations? It is not advised to dispute a debt if it is still within the statute of limitations. This may restart the clock, resulting in paying the full amount you owe.
2. Make Timely Payments on All Your Debts
Create a budget and prioritize paying off your debts. Ensure that you are making your payments on time, as this can help boost your credit score. For example, if you have a credit card, make sure you’re always paying the entire balance due by its due date.
3. Make Extra Payments Whenever Possible
Try to make extra payments towards your debts. If you have a car loan or mortgage, try to pay more than the minimum amount due each month. This will help you pay off your debt faster and improve your credit score; it will also help you save money on interest payments.
4. Monitor Your Credit Report Regularly to Ensure No Errors Are Present
If you notice anything suspicious, contact the credit bureau and dispute it right away. This can help prevent any further damage to your credit score. You may also consider hiring a credit repair company, like The Phenix Group, to help you dispute errors and improve your credit score.
5. Get a Secured Credit Card and Use It Responsibly
A secured credit card is a great way to start rebuilding your credit. You can use it like a regular credit card, but you must make a deposit before using it. Using the card responsibly and making all payments on time will help you build a positive credit history which can boost your credit score.
In Conclusion
A repossession can seriously impact your credit score and is likely to stay on your credit report for seven years. Following the steps outlined in this article can help you create a budget, pay off your debts, and dispute any errors on your credit report. With patience and discipline, you can rebuild your credit after a repossession, and The Phenix Group can help!