I have a question about the affect on my credit score and ranking by a car seizure. I have a car loan with Scotia Dealer Advantage at an interest rate of 26%. I have never been late on a payment and always in full. It’s coming up to 4 years of paying this outrageous amount. I have not been able to refinance because due to my disability I have had unstable work. I am currently waiting for approval with persons with disabilities and am spending most of my income assistance check on my car. I would like to be rid of my car but don’t want to hurt my credit rating even though I know seize or sue rules apply. Is there any advise you can give me?

Thanks so much
J

Response

HI J,

As you may have read on my website, which talks in detail about this issue.

You do have the right to stop paying on this vehicle and they will either have to take it back or sue you for the debt. Most times the creditor would prefer to seize the car vs. suing as that choice generally brings them the most hope of recovering some of their costs.

However, both options will have the same negative impacts on your credit rating as you will show that you have defaulted on the payment. If they sue you, it would a bit longer process so the hit over time is slightly worse than the fact that they had to seize the car. Both really though, will have a “in default – collection started” or R9/8. The individual meanings of these rankings can be seen on their sites (Equifax and Trans Union) sites and the Office of the Superintendent of Bankruptcy also posts a discussion of the meanings of each ranking at https://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca02179.html

So each option is the same really. However, credit score and credit ranking concerns are sometimes issues that people focus on needlessly. Are you looking to obtain more credit? Is there some financial goal that you are setting for yourself that your ranking is crucial to obtaining? Most times when I question people they seem to focus more on “their score” vs. their real goal like:

down payment on a house/condo – Solution: Focus on saving the necessary cash deposit (Say $20,000) and by the time this is done, your credit score would no longer be a problem

car purchase – Solution: There are many options if you need access to a vehicle. There is company from Vancouver that has leasing options developed for distressed debtors with a modest interest rate is 12% as long as you can show a financial ability to make the payments. This is also available to those in bankruptcy or a Consumer Proposal.

These are just some problems and some suggested solutions. Not everything is available immediately and it may take some time. But focusing on the real goal, such as financial stability, is the first step. So for most of your needs as a consumer, your credit report or ranking is really that the goal to which you should be focusing, rather, focus on the overall specific concrete need, and your credit score will improve naturally.