What It Means When a Creditor Re-ages an Account
Many people have heard some variation of “accounts only stay on your credit reports for 7 years.” Part of that is true, because delinquent accounts (charged-off or collection accounts, late payments, etc.) drop off credit reports after 7 years (or 7 ½ years from the date it was first late) under the Fair Credit Reporting Act. 15 USC § 1681c(1). However, there is no time limit for how long accounts without any delinquent history may remain on a credit report.
Lawful “re-aging” may occur after borrowers enter into workout programs or resume making payments on a delinquent loan. 65 Fed. Reg. 39,904.
Unlawful “re-aging,” however, occurs when the date of last activity on a delinquent account is changed to a more recent date to extend the credit reporting of the account beyond 7 years. See U.S.C. v. NCO Group et al., FTC File No. 992-3012 (May 13, 2004). This is the main type of re-aging that most consumers have to be concerned about.
Creditors are not required to re-age accounts after agreeing to a payment plan, workout, or modification, but the FDIC requires any creditor who chooses to do so to establish written policies and established minimum criteria. See 65 Fed. Reg. 39,904. For open-ended accounts (credit cards, and other loans without a maturity date) the criteria includes:
- The borrower has demonstrated a renewed willingness and ability to repay the loan;
- The account has existed for at least nine months; and
- The borrower has made at least three consecutive minimum monthly payments or the equivalent cumulative amount.
For closed-end accounts (most mortgage loans, car loans, and other loans with a maturity date) the criteria includes:
- The borrower should show a renewed willingness and ability to repay the loan;
- The standards should limit the number and frequency of extensions, deferrals, renewals, and rewrites; and
- Additional advances to finance unpaid interest and fees should be prohibited.
How could “re-aging” affect you? While delinquent credit account history generally remains on your reports for 7 years in most cases, it is important to check your credit reports to ensure the date of delinquency (the date it was first 30 days late and not brought current afterwards) matches for accounts that are listed as being in collections, and the underlying original credit accounts. For example, a collection account listed on your credit report should state who the original creditor was. The account should also be reported under the original creditor’s name and account number, and that listing should say the date of delinquency – sometimes the date of last activity. Thus, both accounts should age off the credit report at the same time. If the two entries show different dates, there may be a “re-aging” issue.
If you believe a collection agency or creditor has improperly re-aged your account, you should dispute the error with the credit reporting agencies and directly with the creditor or collection agency. You can find sample dispute letters here, and we recommend that you dispute in writing with delivery confirmation – saving a copy of your dispute letters and proof of delivery for your records. If your dispute is not resolved, or you have any other questions about your credit reports, please feel free to contact our office for a free case review.