Yes, you can get a car loan with a repossession on your credit reports. It gets easier to get an approval the older the repo is, but it’s still possible relatively soon afterward with the right lender.
Lenders to Consider After a Repo
Once your credit score falls below 660, it can be a struggle to find an auto loan approval unless you work with bad credit lenders. As a general rule, most traditional auto lenders aren’t likely to approve you for a car loan with a recent repossession on your credit reports.
With all that being said, you have two main options to consider for a bad credit auto loan after a vehicle repossession:
- Subprime lenders, or bad credit lenders, are likely to only consider your auto loan application if the repossession is at least one year old. If it’s been less than 12 months since the repo, and it may be challenging for you to get an approval. They do, however, assist borrowers with all sorts of bad credit situations caused by things like repossession, bankruptcy, or just credit that’s seen better days. After it’s been a year since the car repo, a subprime lender could be your ticket to an auto loan even if your credit score hasn’t completely bounced back.
- Buy here pay here (BHPH) dealerships, also called tote the note car lots, are unique in their lending process because they don’t rely on a third-party lender’s approval to get you into an auto loan. They do all the car selling and financing in-house, appropriately named in-house financing. A BHPH dealership may not check your credit at all which means your recent repo (whether it happened two days ago or two years ago) doesn’t matter in your auto loan eligibility.
Remember, traditional lenders typically reserve their car loans for borrowers with good credit. These lenders are usually credit unions, banks, captive lenders of some automakers, and some online lenders. They may be willing to consider you after the repossession is a year old, but this varies. The damage of default and/or subsequent repossession may hurt your credit score so much that it’s hard to meet a traditional auto lender’s credit score requirements as well.
However, subprime lenders and BHPH dealers don't rely as heavily on your credit score, making them the wise choice when you need a bad credit car loan.
Which Option Is for You?
There are a few things to keep in mind before you choose between a subprime lender and a BHPH dealer.
First, how old is your repossession? If it’s at least one year old, then a subprime lender may be a better choice. Because subprime lenders are signed up with both franchised and independent dealerships, you typically have both new and used vehicles to choose from based on your eligibility and income. Additionally, subprime lenders report their loans to the national credit bureaus which gives you the opportunity for credit repair. Your timely car loan payments can help you repair your credit after the damage of repossession.
If your repo happened less than 12 months ago and you need a vehicle right away, then going with a BHPH dealership could give you a higher chance of approval. These dealers only sell used vehicles, but if they don’t check your credit reports, then your recent repo doesn’t matter to them. However, when a lender doesn’t check your credit, it means that your on-time payments aren’t going to be reported either – so your credit doesn’t improve if you stay current on the loan.
In terms of credit repair, a subprime lender is usually a better choice. If improving your credit is a priority you can ask the lender about their reporting practices to see if your credit score is likely to benefit from the auto loan.
The Impact of a Repossession
Your credit reports reflect a repossession for up to seven years – but there’s good news. Over time, that repo has less of an impact on your credit score. And after seven years, it’s not on your credit reports at all.
Most negative marks on your credit reports fall off after seven years, too. So missed or late payments that you may have had that lead up to the repo fall off as well. And if you take on new credit you can comfortably afford that’s reported, you can improve your credit for the better.
Let’s Get You Back on the Road
At CarsDirect, we know how tough it can be to find auto lenders that can accommodate bad credit situations, like a past vehicle repossession. Instead of driving all over town to look for one, let us do that legwork for you.
Over the last two decades, we’ve gathered a network of dealerships that assist bad credit borrowers – and our connections are all over the country. To get matched to a dealer in your local area and start the search for your next car loan, fill out our three-minute auto loan request form.
FAQs
You will still be able to buy vehicles after you've had a car repossessed, but you might not be able to get an auto loan if lenders look at your credit history and decide not to approve you. Rebuilding your credit will be an important step to affording and owning your next car.
Will a repossession affect buying a car? ›
Once you're ready to move forward and purchase a new car, the repossession will likely still appear in your credit history. This mark can have a significant negative impact on your buying experience. Financing a car after repossession can be challenging, but it is possible.
Is it hard to get a car with a repo on your credit? ›
After your car is repossessed, your credit report will include a negative item that notes the repossession. As a result, it can be much more difficult to get a new car loan, since creditors take payment history into account when evaluating your loan application.
Can you ever get a repossession off your credit? ›
You can't always get a repossession removed from your credit report, and you shouldn't wait until the seven-year expiration to take action on your credit score. Raising your score by a few points after a repossession can help you get better financing when you need a loan.
How many points does a repossession drop your credit score? ›
How Much Does a Voluntary Repossession Affect Your Credit? Estimates vary, but you can expect a voluntary repossession to lower your credit score by 50-150 points. How big of a drop you will see depends on factors such as your prior credit history and how many payments you made before the repossession.
Should I pay off a repossession? ›
In most states, you have to pay off the entire loan to get your car back after repossession, called "redeeming" the car. The balance you would need to pay to redeem the vehicle might include extra fees and charges, including repossession and storage fees, and even attorneys' fees.
How do I clear my credit repossession? ›
If a repossession is entirely valid and accurate, the only way you could get it removed (other than waiting seven years) is if you can negotiate with your lender to remove the item from your credit report in exchange for paying the debt in full.
How long until a repo is off your credit? ›
A repossession stays on your credit report for seven years, starting from the first missed debt payment that led to the repossession. In the credit world, a repo is considered a derogatory mark. After a repo, it's not unusual to see a person's credit score take a substantial drop.
How do I rebuild my credit after repossession? ›
How to rebuild credit after a repossession
- Pay off overdue bills. If you have other overdue accounts, you could contact each lender to discuss your options. ...
- Don't max out credit cards. ...
- Make on-time payments. ...
- Only apply for the credit you need. ...
- Monitor your credit.
A repossession will stay on your credit report for seven years from the date you stopped paying the loan balance. Once a lender has reported the repossession to the credit bureaus, it can take anywhere from 30 to 60 days to show up on your credit reports.
There are many people who have 700 credit scores or higher with previous repo's. Hopefully, I have give you or someone you know hope with their situation.
Is a voluntary repo better than a repo? ›
A voluntary repossession will remain on your credit report for up to seven years, but it's better than having multiple missed car payments and an involuntary repossession.
What is the best credit repair company? ›
The best credit repair companies of April 2024
| Credit Repair Companies | Best for | Learn more |
|---|
| Credit Saint | Best overall | View offer |
| Sky Blue Credit | Best for couples | Learn more |
| The Credit People | Best for low initial work fees | Learn more |
| Credit Firm | Most affordable | Learn more |
2 more rowsMar 27, 2024
Repossession Affects Your Credit
It is best for you to proactively address the situation and work with your lender to avoid repossession. But, if you have no other options, remember this is not the end of the world, and there are ways to rebuild your credit.
How bad is a voluntary repo? ›
Voluntary surrender and repossession are loan defaults, which stay on your credit reports for seven years. That type of negative mark will harm your scores, especially your automotive-specific credit scores. The next time you apply for a car loan, you'll likely be deemed high risk and charged high interest.
How soon does a repossession show on your credit? ›
A repossession will stay on your credit report for seven years from the date you stopped paying the loan balance. Once a lender has reported the repossession to the credit bureaus, it can take anywhere from 30 to 60 days to show up on your credit reports.
What credit score is needed to buy a car? ›
The credit score required and other eligibility factors for buying a car vary by lender and loan terms. Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian.
How long does a voluntary repo stay on credit? ›
Voluntary repossession can have a significant negative impact on your credit score. This record will stay on your credit report for seven years, potentially making it harder for you to get approved for new credit during this period.
How bad is a voluntary repo on your credit? ›
Voluntary Repo Consequences
A voluntary repossession will likely cause your credit score to drop by at least 100 points. This point drop is due to a couple of factors: the late payments that cause the repo and the collection account that is likely to result from it.
