Having a property taken away for a loan default has to be among the “1000 ways to die”. Sometimes, such things happen in life, and you are left picking up the pieces. Although cases of property repossession have subsided a lot nowadays, the distress meted on victims remains heavy and unbearable. If you think you are on the brink of having your property repossessed and have nothing to stop it, the best you can do is prepare for life after. You need to understand what repossession means for you and family, especially its effect on your credit rating. Knowing steps to take can also help avoid scammers.
Most people know the involuntary form of repossession, whereby the lender often takes your car. The lender has the legal authority to tow your car even if you are not at home. They need to make sure they do not disturb peace in the neighborhood. However, there is also the more peaceful form of repossession- voluntary. The borrower recognizes the inability to make payments and expresses this to the lender. Whichever form it takes, repossession is harmful to the credit rating. We explain how next.
Credit Score Effect
Being unable to make loan payments has ramifications on the credit score, whether there was involuntary repossession or you willingly took back the asset. However, subsequent lenders may view voluntary surrender more positively. Repossession is also associated with additional fees that you can avoid by approaching the lender. Your credit report will indicate whether the property was repossessed voluntary or involuntary. All facts will be added to the report, so you had better consider surrendering the car on your own volition, as you could reduce the effect on your rating.
Many may wonder whether it is possible to avoid repossession altogether. This is a wise concern because all negative reports including repossession remain visible on the report for up to seven years. Of course, timely payments will improve credit score with time. The fact is that many people have had their reports tainted and come out stronger. With a reliable helping hand of a credit repair company in Miami FL, you can mend the negative report. The first step to take is to get a secured credit card, from where the lender will withdraw in case of a missed payment. Since all payments are reported to the bureaus, your credit score will start to improve.
You could also go for a credit builder loan. As you make payments to this loan, your score improves. Another equally effective method is to acquire a good account and use it as your own. Many lenders seem to be receptive of this idea because any problems arising from the account can always be blamed on the account owner. As this approach demonstrates immense trust, you want to better the status or maintain its current rating at worst.
If there is one animal that you cannot run away from, then it is your credit rating. Repossession may worsen an already bad situation, but there are ways out of it. Consult a credible credit repair company for guidance on the strategy to use.