Posted on Thursday, 12th August 2010 by Lucy Hales
There are basically two types of debt reaging and several important points about each to know. We will cover both in details. The first type is when the lender is reaging debt on consumer request. If you have a past due account, you can request the creditor to reset it anew. Reaging a delinquent account amounts to your creditor setting the account due date back to current. If you missed a few credit card payments and your creditor agrees to reage your account, then the missed payments are gone. Not all lenders reage past due accounts. Those that do, must follow two federal guidelines,
– creditors may only reage an account once in a 12-month period and
– twice in a 5-year period for open-ended accounts like credit cards
The account will be considered for debt reaging only if,
– you show a renewed willingness and ability to pay
– your credit card account is at least 9 months old
– you must make at least 3 consecutive minimum monthly payments
Understand that creditors do not have to reage past due accounts. They only do it as favour if you prove reacquired credit worthiness. Again, do not expect your credit card lender to reset your delinquent account simply because you decide to start paying. Many creditors have policy to never reage accounts, some reage only an account one time and all follow the federal guidelines that allow once in a 12-month period or twice every 5 years.
Certain creditors will reage delinquent accounts if you enter some debt management plan. Once you enrolled in a debt management program, creditors typically charge lower interest rates, stop charging late fees and reage the account, bringing it current. So to sum up the first type of reaging, it is a method that can be used to help clean up your credit report, especially if you only had a small problem and are now back on firm financial track.
The second type is much more evil with respect to you, the consumer. Such a debt reaging is practiced by debt collection agencies and creditors to make old debts more collectable. In short, debt reporting reaging is the practice of reporting a bad debt account as more recent than it really is. Reaging old delinquent debt also causes the FICO score to drop dramatically because the scoring model interprets it as a more recent default. This happens if you acknowledge an old debt, often the one with Statute of Limitations nearing expiration or already expired. If you make even the smallest payment on long dormant delinquent account, you reset the SOL clock and it starts anew, making a previously uncollectable debt perfectly collectable again. Moreover, acknowledging an old debt may also extend the other time limit – statute of limitations on judgements opening a door to potential debt collection lawsuits. Thus, many consumer advocates advise debtors not to acknowledge old debts and debts they don’t recognize as their own to avoid inadvertently reaging debt and re-setting the clock on the statute of limitations.
Debt collectors often call on some very ancient debt and by sounding warm and fuzzy, convince many consumers to settle for very little, promising that this will be the end of it. If you do, it will be just the beginning. Instead of settling for little money, collection agency will come after you with guns blazing. Often more than one. That is why, you should ignore the requests to pay old debts and instead, send a letter demanding debt validation.
One other important detail. Do not confuse the statute of limitations with the time period bad debt remains on a credit report. SOL is calculated from the date of last activity on your account. So by reaging an old debt you do restart SOL. You do not change the time period the delinquent account will stay on your credit report. For most delinquencies, it will be the same 7 years from the date when account first turned delinquent. Always check your state SOL laws to find out whether your debts are within the SOL time frame or not. If the statutes are already expired, collectors can take you to the court, but they can’t sue you. See
Bad credit time limits
Statute of limitations for debts
Statute of limitations for judgments
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