Auto lenders in Minnesota may choose to repossess your car if you fail to make loan payments in a timely manner. Technically, your vehicle can be repossessed if a payment is 31 or more days past due. However, lenders generally won’t do so unless your account is at least 60 days past due. A repossession stays on your credit report for seven years and can result in a significant reduction to your credit score.
The events surrounding a repossession also hurt
Lenders will generally report any payments that are 30 days or more past due. A late payment may reduce your credit score by up to 100 points, and failing to get your account back to current may also result in the balance being referred to a debt collection firm. This may be especially true if you owe more on the loan than the car is worth as the lender won’t be able to recoup its losses by seizing and selling the car. You should know that you have the right to contest a lender’s actions if you believe that you’re the victim of a wrongful repossession of a motor vehicle.
How a repossession impacts your credit
By the time a lender is ready to repossess your car, you’ve likely missed multiple payments. Therefore, the hit to your credit score generally isn’t as important as the hit to your creditworthiness. Lenders typically feel uncomfortable lending money to those who have defaulted on previous loans.
A repossession could do long-term damage to your credit score and creditworthiness. Therefore, it’s important to take collection letters, calls or other notices from your lender seriously. Responding to these notices in a timely manner may make it possible to renegotiate the terms of a loan or otherwise avoid losing your vehicle.