A car repossession can definitely affect your credit. Here is how the process works. Let’s say you can no longer afford to make your monthly payments. By the time your discover that you are probably two or three payments past due. This is already showing up on your credit report as 30 or 60 days past due. It gets even worse if the repossession takes place.
Now ABC company repossesses your car and let’s assume you owe $9,000 on your auto loan. Once the company repossesses your car they will sell it for whatever they can. If they sell it for $5,000 you still owe $4,000 and they will bill you and expect you to pay the balance even though you no longer own the car. This shows up on your credit report as a repossessed item and it will show up as a charged off account or an I-9. An I-9 stands for an installment loan, ( I), and when a loan is charged off that means company ABC is submitting your loan account as a loss because they feel it is no longer collectible.
If you ever try to apply for credit for another company they will take a look at your credit report and see that you have a repossession and this will severely impact your ability to get credit in the future. This could remain on your credit file for seven years.
This will also lower your credit score again reducing your ability to receive additional credit from other organizations. Even if you clear this matter up by paying it off in full it remains on your credit file for seven years. Sometimes you can negotiate with creditors if you pay off such a debt. However if you do decide to negotiate so that this does not show up on your credit file make sure you do so in writing. Also you want to make sure the creditor puts their agreement in writing. There have been some creditors that promised not to report certain things on your credit file but have done so anyway. That’s why it is so important to get all information in writing.
Wants your credit file gets destroyed it is very hard to correct it. That does not mean it can never be corrected it just means it will take some time to do so. The best way to correct this situation is to payoff any debts remaining and then after a year you may want to apply for a secured credit card. This is a card where the creditor will approve you for a credit card with a $500 line of credit. And you have to leave $500 on deposit with their organization in the event you default they have your money on hand to cover the delinquency. After you have paid on this account for one year with on time payments the organization will more than likely increase your credit limit and not require you to have money on deposit with them as security.
Bad credit can sometimes stop you from getting a job, a credit card and sometimes you will be forced to pay higher premiums on your auto insurance.