You can remove a car loan from your credit report if the entry is an error by filing a dispute with the three major credit bureaus. If the car loan on your credit report is listed correctly but was never paid off, it will fall off your report after 7 years and you won’t be able to remove it early. If the car loan is closed in good standing, it will remain on your credit report for up to 10 years.
Settling a Car Loan
If your lender agrees, you can settle a car loan for less than the outstanding balance. Although this is a better option than not repaying the debt at all, a settled account still is bad for your credit score and will remain on your credit report for 7 years.
In addition, voluntarily returning your car, or a voluntary surrender, will not remove the loan from your credit report or prevent damage to your credit.
Avoiding Credit Damage
If you are unable to make your auto loan payments, other options include selling your vehicle or, with the lender’s permission, transferring the balance to someone else who will take over ownership of the car and continue to make the payments.
Alternatively, you could refinance the loan to lower your interest rate if your credit score allows you to get approved for a better rate. This would make the payments more manageable.
You can check your credit report and get personalized credit-improvement tips for free here at WalletHub.
This answer was first published on 12/19/22. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
