Missed payments in your credit history, delinquent accounts statuses, and collections are all big negative marks on your credit report. Re-aging can affect all of them, and the result can be both good and bad for you. Understanding what it means and how it can affect your credit is essential to achieving and maintaining a good score.
Important Update: Bureaus Offer Free Weekly Reports Through April 2021
In light of the unprecedented financial crisis caused by the COVID-19 pandemic, the credit bureaus have expanded free credit report access. You can now download your credit report from each bureau once per week through annualcreditreport.com.
We recommend taking advantage of these free weekly reports to check your credit often during this crisis, so you can avoid mistakes.
What does it mean to re-age debt?
Re-aging refers to any action that changes the account history of a debt listed on your credit report.
In some cases, these changes can be good for a consumer. For instance, a creditor may agree to update an account status to current or remove missed payments from its history.
On the other hand, re-aging can also be bad for a consumer, such as when a collector tries to re-age a debt to reset the clock on the statute of limitations on collection.
The good side of re-aging
The positive side of account re-aging is that you may be able to use it to improve your credit score. Re-aging allows you to:
- Update an account status from delinquent to current
- Remove or stop future missed payments in your credit history
This can be crucial in your quest for a better credit score. Credit history is the single biggest factor used to calculate your score. It carries 35% of the “weight” in most-used consumer scoring models, FICO and VantageScore. Missed payments and delinquent account statuses have a serious negative impact on your credit.
But in some cases, you may be able to ask a creditor to re-age your account.
Re-aging an account when you’ve fallen behind
The most common type of positive re-aging is when you’ve fallen behind a few payments, but you’re working to catch up.
Once an account falls behind, the status is listed as delinquent and missed payments are noted until you catch up. This means that even when you start paying again, the account may still continue damaging your score. You keep racking up missed payments until you’ve caught up fully.
But with re-aging, the creditor agrees to bring the account status current and stop listing those missed payments in your credit history. Once you’ve made a few on-time payments consecutively, the creditor may agree to re-aging.
If you’re working to catch up on delinquent debts and you’ve started to make on-time payments, call your creditors to ask about re-aging the account.
Automatic re-aging with federal student loans
There’s one type of loan where re-aging occurs automatically with a defaulted account. That’s with any federal student loan.
If you have a defaulted federal loan and you make full, on-time payments nine out of ten months, the loan’s status will be automatically updated from defaulted to current. This is also known as loan rehabilitation.
Rehabilitation happens even if you are still technically behind on the loan payments. However, any past payments will still be noted as missed in the credit history of the loan.
Re-aging delinquent credit card accounts through credit counseling
Some credit card companies may also automatically re-age your delinquent accounts if you enroll in a debt management plan (DMP) through a credit counseling agency. Once you make three consecutive on-time payments on the DMP, some creditors will re-age your account to bring the status current, even if you’re still technically delinquent.
Again, this will stop future missed payments on the account. However, it will not remove the missed payments you have already incurred on those accounts.
Good faith re-aging to update past missed payments
Another type of re-aging you may be able to negotiate with a creditor is to remove past missed payments. This is known as a “good faith” removal of the negative information on your account.
If you have been an otherwise good customer and extenuating circumstances led to a missed payment or two, you can ask the creditor to remove those missed payments after you bring the account current.
Just keep in mind that a creditor is under no legal obligation to agree to such removal and hold to it. In fact, the Fair Credit Reporting Act requires data furnishers to provide accurate account information. If you legitimately incurred the missed payment, then the creditor is required to report it accordingly.
It may happen that you get a creditor to agree to a good faith removal, but the information may reappear in your credit report later. So, while this may be worth trying to negotiate with a creditor, it is not guaranteed to work. But in some cases, it may be worth a try.
Get help making good faith update requests with SmartCredit.
The bad side of re-aging
While it can work in your favor to re-age debt, it can also be used against you. It’s a trick that debt collectors may try to use to make a delinquent debt look newer than it is. This means the information can stick around longer on your credit report. It can also reset the clock on the statute of limitations for collections. In other words, the collector has longer to hound you.
It’s not always intentional. Collection accounts get bought and sold by collection agencies and debt buyers all the time. Agencies and buyers purchase portfolios of debt – whole groups of accounts – and they do it without checking each individual account.
As a result, they may purchase an account that’s past the statute of limitations or legal credit reporting period. They can even purchase an account that you’ve already paid. They treat it like a new account, report it to the credit bureaus and start pestering you for payment.
This is how a debt that you thought was dead and gone comes back again… Zombie debt.
Date of first delinquency is what matters in reporting
Delinquent debt can only be reported on your credit report for seven years from the date that the account first became delinquent. That includes debts that were charged-off and sold to a collector.
For example, let’s say you have a credit card that you don’t pay because you lose your job. The account becomes delinquent. Then after nine months, the credit card company charges-off the account. Their in-house collections department hounds you for a year. Then they sell the debt to a third-party collector.
Once that happens a collection account will appear in the public records section of your credit report. That collection account can only legally remain on your credit report for five years and three months. The clock doesn’t start from when the collection account was created. The clock starts from the first missed payment you had with the credit card company.
Disputing a collection account that’s past the reporting period
If a collection account appears on your credit report that is past the 7-year reporting mark, contact the credit bureau. You should make a dispute to remove the account because it is past the reporting period. You may need proof of the original account statements that show when the account first became delinquent.
If the account appears on all your credit reports, you will need to make the dispute with each bureau. Or you can dispute the information with the collector and then they must report the account removal to all three bureaus.
SmartCredit makes it easy to make disputes directly with creditors and collectors.
A debt’s age also matters for the statute of limitations
Every state in the U.S. sets legal limits on how long a collector has to pursue legal action on an unpaid debt. This is known as the statute of limitations. It ranges from 3-10 years, depending on where you live.
Collectors may try to re-age a debt to make it appear newer than it actually is. In some states, the statute of limitations can legally be reset if you acknowledge the debt. That is, if you make any payment – even a partial one – or even if you simply say that you know you owe the money, it can reset the clock on collections.
This is not legal everywhere. For instance, in Florida, there’s a law that prohibits re-aging a debt simply because it’s been acknowledged. But that’s not true in all states. You need to check with your State Attorney General or a local Legal Aid Society to ask about the rules for collection in your state.
The power of cease and desist
If a debt is past the statute of limitations, you are under no legal obligation to pay it. A debt collector has no right to sue you in civil court. However, they still have a right to attempt to collect what you owe until you tell them in writing to stop. This is known as a cease and desist letter.
Once you send a cease and desist, a collector has no legal right to further contact. Since they can’t sue you and they can’t contact you, this should put the zombie debt back in the ground.
And if the collector continues to contact you after receiving a cease and desist, then you have a right to pursue them for harassment.
Fight back against collector harassment.
Article last modified on November 12, 2020. Published by Debt.com, LLC