Many people who’ve had to turn over their car to the bank or dealership because they were unable to make their payments believe that giving the car back is the end of the story. Sadly, surrendering the car does not mean that a person is free and clear—the consequences of this act may remain on a person’s credit report for quite some time. That being said, credit reports are often littered with errors.
Whether it’s a mistyped Social Security Number or a similar name being misattributed to an account, someone else’s negative items could be showing up on your credit report. In cases like these, it’s best to consult with licensed credit repair companies in Texas.
Before we get into correcting mistakes on a credit report, let’s talk more about what happens when you surrender your vehicle and how it affects your credit report.
Surrendering a Vehicle and Your Credit
Surrendering a car is the final step in what is likely a months-long process between you and the bank. Long before it got to that point, however, your credit was being harmed.
The harm began when you missed your first car payment and it became more than thirty days late. It was then reported to the credit bureaus. Until you catch up on that first missed payment, plus the current ones, each and every month will be reported as a missed payment. These penalties add up to some serious punishment for your credit score.
In the credit reporting industry, this is what’s known as being “rolling thirty days late.” In some ways, this is worse than the actual surrendering of your car. While surrendering your car will hurt your credit, it will at least stop the late payment reporting by closing the account entirely.
Next, the auto loan account will be listed as closed and noted as a voluntary surrender or voluntary repossession. If the car was involuntarily repossessed, meaning that you didn’t give them the car and they repossessed it while it was parked, it will be listed as an involuntary repossession.
Regardless of whether the car was repossessed voluntarily or not, the repo will remain on your credit report for seven years. If you maintain a clean credit profile after that time frame, its effect will diminish.
Similar Items That May Affect Your Credit
The following are some items that one might find on a credit report that are similar to a surrender or repossession of an automobile:
Judgments
This is a court order to pay money to a creditor or third party as a result of a lawsuit. Judgments may show up on your credit report as an amount owed, the judgment date, and the judgment amount. As of 2018, many credit bureaus do not report judgments, except in special circumstances.
Reasons for judgments may be things like missed child support, personal lawsuits, or judgments by creditors. Other reasons include IRS debt showing up on your credit report as a judgment or a collection notice.
Bankruptcies
Much like repossessions and foreclosures, a bankruptcy will show up as its own line item on a credit report, listing the date it occurred. Because you couldn’t pay, the accounts were closed and written off, and will be listed as discharged in bankruptcy. While a bankruptcy is rough, similarly to surrendering a car, it does stop the financial bleeding.
Inaccurate Items on Your Credit Report
A larger percentage of Americans have inaccuracies on their credit reports that they may not know are harming their credit scores. If you have recently noticed inaccurate items in your account, professional and licensed credit repair companies like The Phenix Group can help you get these inaccuracies removed.
By removing these inaccuracies, you’ll not only be clearing your name, but potentially boosting your credit score. Credit repair companies can also provide credit counseling to help you make the most of your credit report and overall profile, so you can focus on making the most of your finances.
In Closing
Credit scores are important, so it’s important to understand their ins and outs. Surrendering your car can seriously damage your score, but depending on your circumstances, sometimes it’s better than the alternative.