How Does Letting a Luxury Item Go Back to the Bank Affect a Credit Rating?

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When a luxury item goes back to the bank, it's usually in the form of a repossession, which will have a negative affect on a person's credit rating. Find out why it's important to not buy luxury items that can't be afforded with help from a registered financial consultant in this free video on credit and personal finance.

Part of the Video Series: Credit & Personal Finance
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Video Transcript

This is financial adviser Patrick Munro talking about how does getting a luxury item and letting it go back to the bank affect your credit? One of the things that is important folks is never to acquire a luxury item unless you deserve one and can pay for one. Many people want to live beyond their means and as result once they acquire a luxury item they find over time they can no longer pay for it or keep it up. As a result it ends up going back to the financial institution and the most notable of this would be a luxury car and it does affect your credit because what that would be known as would be a repossession where something that was a security that is to say the luxury car was given to you and a loan was placed there and you were not able to keep the loan and therefore had to give the vehicle back which is the security and it was repossessed by the financial institution. This is a negative. It is called a repossession and it is placed on your credit bureau as such. Next to a bankruptcy it is very very serious so you want to make sure that you do not acquire luxury items that you cannot pay for. If you can pay for them you are entitled to them but always live within your means because the returning or repossession of these assets will definitely affect your credit bureau in a negative way. This is Patrick Munro financial adviser talking about how acquiring a luxury item and having it sent back to the institution can negatively affect your credit score.

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