You can usually finance another car after a repossession, but you may not be able to do it right away. Repossession damages your credit, and most lenders recommend you wait at least a year before applying for another auto loan. If you can’t wait until your credit is rebuilt, you need to make sure to work with a subprime lender.
How Subprime Lenders Can Help
Subprime lenders work with credit-challenged consumers. These lenders understand that things happen which may damage your credit, but that doesn’t mean you don’t need the items credit can provide, like a car loan.
Therefore, subprime lenders base approval for auto loans on more than just your credit score. These considerations, like income, employment, residence stability, and your willingness to make a down payment, show them you have the ability, stability, and willingness to successfully complete a car loan. This is especially important if you already have a repo on your credit reports.
Even if you wait the recommended year before applying for another loan, lenders can still see the repossession on your credit reports – it stays there for seven years. The good news is that the impact to your credit lessens as time goes by.
Many subprime lenders may be willing to give you the benefit of the doubt with one past repossession. However, most won’t offer you a loan with more than one repo showing on your credit reports.
3 Steps to Start Rebuilding Credit After Repossession
In some cases, you can take steps to get your vehicle back after a repossession, but this isn’t always easy, or possible. If you aren’t able to recover your car, you should begin preparing for your next auto loan now.
If you have a repossession on your credit reports and have time to rebuild your credit, there are a few things you can do to get the process off on the right foot.
Here are three steps you should take to begin the credit rebuilding process after a repossession:
- Get your credit reports and score – The first thing you need to do is know where your credit stands. This means getting your credit score and reports. You’re allowed a free copy of your credit reports from each of the three national credit bureaus – TransUnion, Experian, and Equifax – once every 12 months. Once you have your reports and score, check them over to find out what’s holding back your credit score. You should also check your reports for errors and notify the reporting bureau(s) with a formal dispute. Fixing mistakes on your credit reports can make a positive impact.
- Pay your bills on time – One of the best things you can do to raise your credit score is pay your bills on time. Each on-time payment adds to your payment history, which makes up 35% of your credit score. In the same vein, missing and late payments have an equally large impact on your credit score declining. The longer you can build a positive payment history after a repossession, the better.
- Keep your balances low – When you have a balance on things like loans and credit cards it can impact your credit as well. Amounts owed makes up 30% of your total credit score, and a large piece of it is your credit utilization. Credit utilization compares how much you owe on your credit cards to how much available credit you have. When you keep your balances low and regularly pay off your credit cards, it looks better in the eyes of lenders. The rule of thumb is to keep your credit utilization ratio below 30% of available credit.
Find a Car Dealership for Bad Credit Near You
Now that you know it’s possible to get another car loan after repossession, it’s time to find the right dealer for the job. Subprime lenders typically only work through special finance dealerships, and it isn’t always easy to pick these dealers out of a crowd. Instead of stressing over finding the right dealership, let Drivers Lane help.
We work with a large network of special finance dealers throughout the U.S., and we want to help you get connected to one in your area. To get the process started right now, simply fill out our easy, fast, and free auto loan request form!