Auto loans are highly convenient, but they’re also complex to manage. People who take auto loans can sometimes become unable to pay them off. This leads to repossession of the vehicle by the lenders. Being unable to pay off a loan evidently reflects poorly upon a person’s credit score, which is why many people approach credit repair consultants for assistance.
What Is Repossession?
Whenever somebody finances a vehicle, the lender will hold it as security interest until the borrower pays off the loan. If the borrower fails to make timely payments as defined by the loan terms, the lender can seize the vehicle, i.e. “repossess” it. If the borrower fails to make the due loan payments for more than 60 days, it’ll be considered a default on loan. Once a borrower defaults, credit unions or banks start the repossession process.
Does Repossession Hurt Your Credit?
As a credit repair agent, you might encounter repossessions on your clients’ reports quite often. Repossessions are a separate negative item on a person’s credit report. They can stay on the report for up to seven years. In that time, they significantly hurt credit scores since they add negative marks like late payments, defaults, and collections to the credit report. Since repossessions have to do with payment history, and payment history is the biggest factor that affects credit scores, they can be highly detrimental to credit scores. As long as a repossession item stays on someone’s report, it’ll continue to put off lenders and creditors.
How to Deal with Repossession?
There are only two good ways to deal with an auto repossession item on a client’s report: renegotiate with the lender or dispute inaccurate reporting.
Renegotiation
Repossessions hurt both the lender and the borrower. If your client can convince their lender to renegotiate the loan terms and accept a debt settlement, then you can help remove the repossession from their credit report.
Disputing
As a credit repair agent, you should be able to identify inaccuracies in a client’s credit report. If you and your client recognize a repossession item as inaccurate, then you can file a dispute with the credit bureaus. If the bureaus investigate and find your client’s dispute claim to be valid, they’ll remove the repossession from their report.
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