Many people know that there is the possibility that their possessions could be repossessed if they do not pay their bills. Cars are often the most thought of item that can be repossessed for failure to pay, but other items like furniture, boats, and other items paid in installments can be repossessed. The repossession, or repo, is also reported to the three credit bureaus. Not only are you hit with negative marks for not making your payments on time, but a repossession will also be noted in your credit report as well. But, how long does a repo stay on your credit?
When Does A Repossession Occur?
A bank or the financing company has the right to repossess, or take back, an item if you stop making timely payments. In the case of a car, boat, or other vehicle, your creditor even has the right to sell your debt to a third party who has the right to repossess the item as well. If you are behind on your payments, the lender can repossess your car without going to court or even giving you any advance warning. In many states, your lender can repossess your items or vehicle as soon as you default on your loan or default on the lease. Your contract will specifically state what exactly is considered a default on your loan, but most banks consider a default when you fail to make the very first payment. But, it varies by state, bank policy, and type of item bought on credit. Consumers should read their purchase contract carefully to know when they are in default.
How Long Does A Repo Stay On Your Credit
There is a little confusion and some conflicting guidance on how long does a repo stay on your credit. Defaulting on a loan, having a car repossessed, or making a late payment all stay on your credit reports for the same amount of time when the borrower reports them. All negative marks including repo (except a bankruptcy) stays on your credit report for seven years. A bankruptcy stays on your credit file for ten years. Repossessions also have a much more severe impact on your credit score than just missing a payment or paying late. Repossessions and defaults carry severe penalties to your credit score and can reduce them by one hundred points or more in one swoop.
How long does a repo stay on your credit report? Make sure that you understand the severity of having an item repossessed. The compounded negative impact on your credit score from not making payments, finally defaulting, and then having the item taken back by the lender will crush your score.
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