Best Credit Cards After Vehicle Repossession
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It can be incredibly challenging to deal with the aftermath of a vehicle repossession. When this occurs, you will not only lose your car, but your credit will suffer tremendously. A lender can repossess a vehicle after you have defaulted on your payments, which itself will hurt your credit score dramatically. And once the vehicle is repossessed, you could still owe money on the loan if the vehicle’s sale wasn’t enough to cover your remaining balances.
Rebuilding your credit after repossession
The first thing you will want to do after a repossession to help rebuild your credit is to make sure the vehicle loan is paid off. Any remaining money owed after the sale of the vehicle is called a “deficiency balance,” and it will remain on your credit report until it is paid off. Therefore, check your credit report and attempt to settle any outstanding balance with the lender, which will be critical in your effort to “stop the bleeding” before rebuilding your credit.
But once that debt is paid in full, you will then have to start the process of re-establishing a positive credit history, even though you will have a poor credit score. Opening a new account is one of the only ways to build your credit, but it will be very difficult to get a new loan with a low credit score
The solution is a product known as a secured credit card. A secured card works much like a standard credit card, except you must submit a refundable security deposit before your account can be opened. Then, you can use your card the way you normally would, and increase your credit score by making timely payments each month. It can take as long as seven years before your repossession drops off your credit report, but you can mitigate that damage by opening up a secured card account and being very careful to make on-time payments.
In the meantime, a secured credit card offers the convenience and security of a standard credit card, including more protections against fraud than is offered by debit cards, prepaid cards, cash or checks. A secured card can also offer features such as purchase protection, extended warranty coverage and rental car insurance.
Here are four of the best secured credit cards that you can qualify for after repossession:
Consumers with low credit scores should do everything possible to increase their score. One new tool on the market may provide some help in this area. Add your positive utility payment history to instantly increase your FICO® score. Experian Boost™ helps by giving you extra credit for the utility and mobile phone bills you’re already paying. (Results may vary; see website for details.)
The most important tip is to make every payment on-time as your payment history is one of the most critical factors on your credit report. To help you to do this, you can enable payment notifications and reminders via email or text. You can also schedule automatic payments from the card issuer or from your bank. And once your credit score rises, you can receive your refundable security deposit back and apply for a standard unsecured credit card.
By using the right credit card, you can begin rebuilding your credit after you have been through a vehicle repossession.