How to Fix Credit After a Car Repossession

Quick Answer

To fix your credit after a car repossession, start by reviewing your credit reports and getting caught up on past-due payments. Beyond that, reduce your credit utilization, get credit for non-debt payments and consider becoming an authorized user.

Portrait of a woman calling her car insurance while her car is being towed.

How Does a Car Repossession Affect Your Credit?

A car repossession is a serious matter and can cause significant damage to your credit score. The negative mark will remain on your credit reports for up to seven years from the first date you missed a payment.

But lenders typically don't repossess a vehicle unless you've fallen behind on several months' worth of payments, so you'll likely also have other negative items, including multiple missed payments and a loan default.

If the lender sells the car but doesn't recoup the remaining loan amount, you'll have what's called a deficiency balance. If you can't pay that, the lender may send the debt to collections, hurting your credit even more.

Learn more >> How Does Repossession Work?

How to Fix Your Credit After a Car Repossession

While a repossession can hurt your credit score for up to seven years, its negative impact can diminish over time, especially if you can add positive information to your credit file. With that in mind, here are some general guidelines to help you determine your path forward.

1. Review Your Credit Reports

Ultimately, the steps you take to rebuild credit after a repossession will depend on the state of your credit history. If your car loan is just one of many problem areas, you'll have your work cut out for you. But if you've generally managed your other debts well, the process may be simpler.

In addition to your free Experian credit report, you can also get free weekly copies of your TransUnion and Equifax reports through AnnualCreditReport.com. As you evaluate your overall credit health, watch out for anything you don't recognize. If you find inaccurate or fraudulent information, you have the right to file a dispute with the credit reporting agencies.

2. Get Caught Up on Past-Due Payments and Collections

While you can't remove legitimate late payments from your credit reports, getting caught up on past-due accounts can help avoid further damage to your credit score. Consider contacting your lenders to come up with a payment plan that works for you.

Also, if you have any debt in collections, newer credit scoring models disregard paid collections, so paying them off can help increase your score. Once you're caught up, make it a priority to continue paying your bills on time going forward.

3. Reduce Your Credit Utilization Rate

Your credit utilization rate is calculated by dividing your credit card balances by their respective credit limits, and it's another major factor in your FICO^® Score^☉ . While some credit experts recommend keeping your utilization rate below 30%, there's no magic threshold for a good credit score—the lower your utilization, the better.

Because your credit utilization is recalculated every time a credit card company reports a new balance—typically on a monthly basis—paying down your credit card debt is an excellent way to see relatively quick results.

4. Get Credit for Non-Debt Payments

If you pay your other bills on time, you may be able to use your positive payment history to increase your credit score.

Experian Boost^®^ø is a free feature that allows you to add rent, phone, utility, insurance and even some streaming subscription payments to your Experian credit file. Once you complete the process, you'll get instant results for your FICO^® Score.

5. Become an Authorized User

If you have a loved one who uses their credit cards responsibly, consider asking them to add you as an authorized user to one of their accounts.

Once you're added, the card issuer will add the full history of the account to your credit reports, which can help improve your credit quickly. Just make sure that the primary cardholder continues to use the card responsibly, including paying on time every month and maintaining a low utilization rate.

6. Consider a New Credit Account

If you don't have other credit accounts you can use to add positive information to your credit reports, consider applying for a secured credit card or a credit-builder loan. Some hybrid debit-credit cards don't even require a credit check, and they also don't charge interest. While credit-builder loans charge interest, the rates are typically much lower compared to other bad-credit loans.

That said, because many bad-credit loans charge high interest rates and fees, it's crucial that you avoid taking on unnecessary debt that could put a strain on your budget and undo your efforts to rebuild your credit score.

Learn more >> What Is a Credit-Builder Loan?

How Long Does It Take to Build Credit After a Repossession?

There's no universal set timeframe for rebuilding your credit score after a repossession—or any other major negative credit event, for that matter.

That's because credit scores are based on complex formulas that take your full credit history into account. So, again, if your car loan is the only problem, you may be able to fix your credit more quickly than if you also have other issues that you need to address.

Learn more >> How Long Does It Take to Rebuild Credit?

How to Remove a Car Repossession From Your Credit Report

You can't remove a repossession from your credit report if the information is accurate. In this scenario, you'll need to wait until seven years after your first missed payment for the derogatory mark to fall off on its own.

However, if you find information on your credit reports that's inaccurate—including details related to a repossession—you have the right to file a dispute with the credit bureaus.

Start by reaching out to the lender to get the information corrected or removed. If that doesn't work, you can submit a dispute with Experian and the other bureaus by verifying your identity and providing details and documentation to support your request.

The credit bureaus will typically investigate and resolve your dispute within 30 days.

Monitor Your Credit to Track Your Progress

While working to fix your credit score after a repossession, it's important to monitor your credit regularly to track your progress and also spot other issues as they come up.

With Experian's free credit monitoring service, you'll get access to your FICO^® Score and Experian credit report, along with real-time alerts when changes are made to your report. You can even download the Experian app to stay on top of your credit everywhere you go.

How Good Is Your Credit Score?

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How to Fix Credit After a Car Repossession

In this article:

How Does a Car Repossession Affect Your Credit?

How to Fix Your Credit After a Car Repossession

1. Review Your Credit Reports

2. Get Caught Up on Past-Due Payments and Collections

3. Reduce Your Credit Utilization Rate

4. Get Credit for Non-Debt Payments

5. Become an Authorized User

6. Consider a New Credit Account

How Long Does It Take to Build Credit After a Repossession?

How to Remove a Car Repossession From Your Credit Report

Monitor Your Credit to Track Your Progress

Instantly raise your FICO^® Score for free

How Good Is Your Credit Score?

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Instantly raise your FICO^® Score^☉ for free^ø

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In this article:

How Does a Car Repossession Affect Your Credit?

How to Fix Your Credit After a Car Repossession

1. Review Your Credit Reports

2. Get Caught Up on Past-Due Payments and Collections

3. Reduce Your Credit Utilization Rate

4. Get Credit for Non-Debt Payments

5. Become an Authorized User

6. Consider a New Credit Account

How Long Does It Take to Build Credit After a Repossession?

How to Remove a Car Repossession From Your Credit Report

Monitor Your Credit to Track Your Progress

Instantly raise your FICO® Score for free

How Good Is Your Credit Score?

Resources

Latest Research

Latest Reviews

Instantly raise your FICO^® Score for free