How Repossession Affects Your Credit Rating
Repossession can have serious short term and long term consequences. Not only does it mean that you lose your home, but it can have a detrimental effect on your credit rating. With your credit score being an important financial number throughout the course of your life, understanding how it can impact your credit score is an important step to help you understand and deal with the consequences.
Your credit rating is calculated on a variety of factors such as, types of credit in use, payment history and length of credit history. Credit providers use this data to determine how well you handle credit.
The main factor credit providers look at is if you have defaulted on any payments. A repossession will have a significant impact on your credit score because you are defaulting on a payment. This will significantly lower your credit score. In some cases it can result in you moving into the "Poor" credit category. This means that you are categorised as a 'high risk' borrower which reduces your chances of obtaining an attractive loan in the future.
This also affects your current lending commitments because lenders will be reluctant or possibly unwilling to extend credit to you. Having said this lenders have different ways of calculating who is deemed a risk, so you might be rejected by one lender but accepted by another.
Does paying off my repossession help my credit score?
You can help your credit score by repaying your repossession in full, but you must ensure that your lender writes off the debt and records that you paid it in full. It is possible to ask the lender to remove the account from your credit report so it doesn't have a negative impact on your credit score.
If you're unable to make a full payment you can agree a settlement with your lender. This still will have a negative impact on your credit score because the balance settled was less than the outstanding balance but it will show lenders that you made an effort to pay back what you could at the time.
How long does it take for repossession to appear on my credit report?
As soon as your lender has actioned repossession and it has gone through it will appear on your credit rating.
How long will repossession stay on my credit report?
The repossession will remain on your credit report for up to six years. The consequences of this mean that you might struggle to obtain credit or only obtain credit under unfavorable terms.
Creditors make their lending decisions based on how great a risk a person may represent in terms of defaulting on the loan. They often use a credit score to make a quick decision.
Can I rebuild my credit score?
Yes, it is possible to rebuild your credit score after a repossession but it's not a straightforward process. You will be able to recover quicker from a repossession If you're up to date on your other payments. There are a number of things you can do to help rebuild your credit score.
- Keep on top of payments
- Manage your accounts
- Reduce your debts
- Set yourself a budget
Taking action before repossession occurs is vital in ensuring that it doesn't have a long term effect on your credit rating. If you've found yourself behind on your mortgage payments, it's important to act fast leaving you enough time to sell your home before repossession takes place.
At Fast Sale Today, we buy homes fast for cash to help people like yourself who are struggling financially and are possibly facing repossession. We understand that acting fast to prevent repossession is paramount to protecting your credit rating. Our process is quick and hassle free, with typical completion times within 7 days.
To take more control of your future and prevent the negative implications of repossession contact us today to discuss your situation in more detail.