The Effects of Repossession on Your Credit Score

When you go through a repossession, credit score considerations should be at the front of your mind. Your credit score is the most important financial number that you have. It will influence the amount of money that you pay for things over the course of your lifetime. You will have to pay higher interest rates on loans and other accounts, and you will even have to come up with bigger deposits for things like an apartment and a cell phone if your score is low. Having a low credit score can even make it difficult to get a job, as many employers look at them when hiring. One of the most devastating things that can happen to your credit score is a repossession. Here are a few ways that a repossession affects your credit score. 

Late Payments

When the credit bureaus come up with a value for your credit score, one of the biggest factors that they look at is the timeliness of your payments. In fact, that single criteria makes up about 35% of your credit score. When you have something repossessed, it is usually the result of missing several payments in a row without an attempt to fix the problem. The company that you borrowed from has been reporting these late payments every month to the credit bureaus, and the late payments are showing up on your credit report. This will significantly lower your score and make you very unattractive to potential future lenders. 

Blemished Record

In addition to the late payment hit that you take on your credit, you are going to be hurt by the actual repossession itself. This is a huge blemish to your permanent record, and the credit bureaus will make you pay with a lower credit score. The repossession is likely to be on your credit report for quite a while. In fact, in most cases, it will be on your report for seven years. 

This will require that you conduct your financial transactions on a cash basis during the interim. Credit will not be available for you, which can considerably change the way that you lead your life. It may not affect the day-to-day activities as much as it will the times when you want to make a larger purchase. 

Rebuilding Your Credit Score

While it will not be easy, it is possible to rebuild your credit after a repossession. By putting yourself on a strict payment plan, reducing debt, and keeping track of your accounts better, you can rebuild your credit score. You should get started immediately, as the other aspects of your credit file can be improving while you are waiting for the repossession to be taken off of your record.