How to Re-Establish Your Credit After a Car Repo

Having your car repossessed is an embarrassing situation, but if you fall too far behind on your payments, it is the likely outcome. What you may not realize is that losing your car to the bank costs you more than just your freedom. It has a huge impact on your credit score, and bouncing back can be a challenge. If you are trying to rebuild your credit score after a car repo, take some time to learn about the steps you can take to raise your score while the repossession is still on it.

Instructions

1. Contact your lender about the repossession. You may be able to craft a repayment plan for the balance you owe. Once you pay this off, your credit history will be updated.

2. Get a copy of your credit history. You can get one for free from each of the three credit bureaus once a year through annualcreditreport.com.

3. Check the credit history for any errors. While fixing errors does not directly affect the impact of the car repossession on your credit history, it will raise your credit score overall. Remember, the car repossession is only one item on your credit history, and if everything else is good it will have far less of an impact.

4. Target accounts on your credit history that are listed as unfavorable. Accounts that have a balance that is close to the credit limit, for example, will count against you, as will accounts that you have fallen behind with paying. Do whatever you can to fix these.

5. Begin paying all debts on time, every month.

6. Check the credit limits listed on your report, and ask your credit card company to update the information if your credit limit is higher than what is listed on your credit report. Your debt to credit limit ratio impacts your score.

7. Open a secured line of credit or credit card if you cannot get a regular one, and use this to put positive information on your credit history.

Tips & Warnings

• Remember that the car repossession will stay on your credit history for seven years. The only way to improve your score is to work on the other parts of your history. Give yourself time, because credit repair does not happen overnight.

• Be cautious about companies that claim they can repair your credit score instantly. They can do nothing that you cannot do on your own, and they will charge you quite a bit for their services.

Resources

• Free Annual Credit Report
• Seven Fast Fixes for Your Credit Score
• Credit Repair: Do It Yourself or Hire a Company?