How does letting a car go back to the lienholder affect your credit?

Answer 1

It is a blackmark on you credit for a number of reasons. Each month that the loan is in force there is a record listed to the credit bureaus for each payment made on time or late. So if the car is going back to the leinholder there is generally late payments that will significantly affect your credit rating. Also once a loan is listed as a voluntary repossession as in this case it will show the negative information as well as a balance that is still owed. This is very important to know. The bank (lender) will more then likely sell the car at auction after they take it back. So say your loan is still for 10,000 and the bank sells the car for 7,000. You are still responsible for the 3,000 and they will come after you to collect that even though you no longer have the car. All of that will also be reflected on your credit reports assuming that they report to the three major credit reporting agencies.