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

Re-aging is the term used when a debt’s status changes in credit reports to make them appear as a new debt. Unless a financial institution is the one doing the re-aging process after a payment agreement has been established, neither the original creditor nor a debt collector can re-age a negative account.

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).

An account is considered delinquent if it has gone unpaid or it is not paid as agreed. Accounts in good standing are those that have either been paid off or are currently being paid as specified in the original loan contract. Delinquent accounts are reported to the main credit bureaus, and a creditor can also sue to reclaim what is owed. Nonetheless, the time frame in which both of these actions might happen ranges from lender to lender and can be influenced by state laws. There is a statute of limitations in each state, for example, regarding debt collection time limits.

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 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.

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.

On the other hand, there is also positive re-aging, which is meant to help consumers who are seeking to recover after financial issues. Once you fall behind on a bill, it can be challenging to catch up. Your account may be reported as late every month, even though you are making some payments. When this happens, it’s called “rolling lates,” Credit.com explains. To prevent these accounts from being listed as delinquent every month, the financial institutions can re-age them, so they are reported as current.

In this type of re-aging, an account that was reported as late every month to the credit reporting agencies will now be reported as “paid on time.” In other situations, the financial institution will go back into the payment history and bring all the delinquent payments current. In other instances, the account will simply be classified as “paid on time” for the current month and going forward, as long as payments proceed to be made on time.

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