What is re-aging and can it harm your credit report?

by Ariana Almodovar ● Posted on October 30th, 2018

Understanding Re-aging on Credit Reports: Navigating Negative and Positive Impacts

Re-aging occurs when a change in a debt’s status on credit reports makes it appear as a new debt. A financial institution may re-age an account after establishing a payment agreement, but neither the original creditor nor a debt collector can re-age a negative account otherwise.

No matter how many times a delinquent account is transferred or sold from a debt collector to another, the date of first delinquency should not change, according to RebuildCreditScores.com. Doing so is a severe violation of the Fair Credit Reporting Act (FCRA).

Delinquent Accounts

An account becomes delinquent when a borrower fails to make payments or does not pay as agreed. Accounts maintain good standing when borrowers either pay them off or make current payments as the original loan contract specifies. The main credit bureaus receive reports about delinquent accounts. Additionally, creditors have the right to sue to recover owed amounts. However, the timeframe for these actions varies among lenders and is subject to state laws. For instance, each state sets its own statute of limitations on debt collection time limits.

negative credit items

A negative credit item, such as charge-off, can live in your credit report for seven years from the date of first delinquency. Any collection agency that may end up with the charged-off account must comply with that same date. A debt collector re-aging an account can cause critical damage to your credit files as re-aging would allow a collection account to continue on your credit reports forever.

Payment history

Payment history is one of the most significant factors in assessing your credit scores, and within that factor, most scoring models will study the number of late payments listed on the credit report and how recent those late payments were.

re-aging of past debts

That’s where re-aging of past debts can come in. Modifying an account’s delinquency status can influence both of those factors in either a positive or negative way. Of course, the best way to determine how re-aging might help (or hurt) your credit is to monitor your credit scores. Then you can design an action plan that may involve requesting creditors to re-age accounts, or disputing those that have been inappropriately re-aged.

Here are seven steps you can follow if you believe you are a victim of re-aging:

Request documentation from the credit reporting agencies. This will not be a dispute letter but a letter inquiring your consumer disclosure file, which includes a thorough history of your credit information under the FCRA section 609.
Once you obtain confirmation of the date of first delinquency, review the dates of the original creditor (charged-off account) and the collection account associated with that debt. The collection amount must match the DOFD of the original creditor. If they don’t match, and the collection agency shows a more recent date, re-aging has occurred.
Dispute the account.
Review your state’s statute of limitations on the debt. If the statute of limitations has expired, you can’t be legally sued for that debt.
Report re-aging to the Federal Trade Commision (FTC) as this is a severe misdemeanor under the FCRA. It would be best if you also communicated this to your state’s attorney in general.
Report the collection agency and the credit bureau to the Consumer Financial Protection Bureau when you have a filed dispute.
Take legal action if your dispute efforts have not resolved the matter.

positive re-aging

Positive re-aging, aimed at aiding consumers recovering from financial difficulties, offers a solution when catching up on a bill becomes challenging. Even if you make some payments, your account might still face monthly late reports, known as “rolling lates,” as Credit.com describes. To stop the monthly delinquent listing, financial institutions can re-age these accounts to reflect a current status.

In this re-aging process, credit reporting agencies will report an account previously marked late every month as “paid on time.” Sometimes, financial institutions actively update payment histories, changing all delinquent payments to current. Alternatively, they may mark the account as “paid on time” for the current and future months, provided ongoing payments are timely.

Conclusion:

In conclusion, re-aging can have significant implications for your credit history, both positive and negative. Understanding the distinction between illegal negative re-aging and beneficial positive re-aging is crucial. By staying informed and vigilant, you can protect your credit score from unlawful practices while also utilizing positive re-aging as a strategy for financial recovery. Always monitor your credit reports, understand your rights under the FCRA, and take action when necessary to ensure your credit history accurately reflects your financial behavior.