If you have fallen behind on making car payments, the bank or car dealer can repossess your vehicle. This can be a very upsetting experience since they can show up and take possession of the car when you least expect it. Another option is voluntary repossession, which means you voluntarily turn your vehicle over to your lender rather than waiting for them to show up unexpectedly. Even though this still causes damage to your credit, it means the extra fees that might be charged for repossession aren’t passed onto you.
Returning the vehicle doesn’t close the door on the loan. The lender will probably auction off your vehicle and credit the sale price toward your loan, but you’re still responsible for the remaining balance.
What Happens to Your Credit After Voluntary Repossession?
If you have reached a point where you’re considering voluntary repossession, you’ve probably already missed one or more payments. Whenever a payment is 30 days or more overdue, it causes damage to your credit. Late payments, bill collectors, and repossession are negative marks that can remain on your credit for seven years. How badly it affects your credit depends on a variety of factors such as how late your payments were and whether you ended up in collections.
Before you decide to turn your vehicle in to the lender, contact the lender to find out if you have any other options. They may consider negotiating the terms of the loan so that you can pay a lower payment that’s more affordable. If you’ve had to go through with voluntary repossession, you may have questions such as “how do I fix my credit after voluntary repossession?”
Working on Improving Your Credit
The information on your credit report is used by potential lenders to decide whether they think you’re likely to repay borrowed money. The fact that you’ve had some financial problems doesn’t mean you’ll never get a loan again, but you should get to work right away doing what you can to fix your credit after voluntary repossession.
One of the most important things you can do is to pay your bills on time. You may want to consider having payments automatically drafted each month so you don’t forget to make a payment. If you have other outstanding debt, pay down as much of it as you can. Since it will be more difficult to borrow money after a voluntary repossession, you may want to consider obtaining a secured credit card as a way of building a good payment history.
Repairing Your Credit After Credit Missteps
If you have credit problems such as a voluntary repossession, it will take time for your credit to improve. Even if you’re responsible for some of the negative marks on your credit report, make sure there’s nothing on your credit report that is inaccurate. If you find errors on your credit report, dispute them immediately.
Dovly can help you take the necessary steps toward repairing your credit. Our automated credit repair engine manages, tracks, and helps you fix your credit and simplifies the process of disputing errors on your credit report. Get in touch with Dovly today to find out what we can do for you.