How Many Points Does A Repossession Drop Your Credit Score?

Last Updated: Nov 15, 2022

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Your credit score is calculated by evaluating several aspects of your overall financial portfolio. Lenders use your credit score to help determine the probability of you paying back the loans they provide.

If you are unable to fulfill the repayment obligations in a timely manner your credit score will be negatively impacted. In extreme cases like defaulting on the debt, lenders may repossess items obtained with the loan to reduce potential losses they may incur.

How Many Points Does A Repossession Drop Your Credit Score By?

If your property is repossessed due to defaulting on loan obligations, your credit score will be drastically affected. Repossessions may incur point deductions of 100 to 150 points in total. Considering credit scores are capped at 850, this signifies a drastic decrease in your credit score.

If your repossession is voluntary your credit score may only drop up to 100 points, however, this remains a significant impact to consumer credit scores. Once the repossession occurs, it will remain listed on your credit report for 7 years further compounding the impact on your overall financial health.

How Can A Repossession Affect Your Credit Score?

Repossessions are detrimental to anyone’s credit report. Repossessions impact credit scores drastically due to the various contributing factors leading up to the actual repossession, these include:

  • Late payments: Repossessions can only occur if you have outstanding payments, late payments will be reported to credit bureaus decreasing your credit score.
  • Loan Default: If your missed payment remains outstanding for more than 30 days, it is at your lender's discretion to report the default on your debt.
  • Vehicle Repossession:Once you are reported as defaulting on a debt your lender may then initiate the repossession process, further adding to the decrease in credit scores.
  • Collections: If the outstanding balance cannot be settled your lender is likely to employ debt collectors to take over the debt collection process.

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What Can You Do When Faced With Repossession?

The following methods are used to potentially remove derogatory items like repossessions from your credit report:

  • Disputing items with TransUnion, Equifax and Experian the 3 major credit bureaus.
  • Disputing items with the original creditors,
  • Send a goodwill letter to the creditor who reported the remark, and
  • Negotiate having the item removed by paying the balance, or a portion thereof this is called “pay for delete”.

If you are unable to pay the debt obligations, adding attorney fees would only add to your financial strain. Consider consulting a credit repair specialist in this type of situation. Companies like Credit Sage can help you weigh your available options to protect your credit score and advise you on obtaining the best possible score available to you.

Bottom Line

If you have failed to meet your loan obligations for several billing cycles, your lender is likely to initiate repossession proceedings to satisfy the loan amount, or minimise their potential loss on the loan. If this occurs your credit score will be negatively affected and you will lose your property.

Consider the assistance of credit repair specialists, like Credit Sage to help you navigate this credit nightmare and get you on track to the best possible credit score available to you.

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