Re-aging debt is a term used to describe any actions that change the account history of a debt that is listed on your credit report. Re-aging a debt restarts the statute of limitations of collecting on a debt, even if the borrower no longer legally owes the debt. Essentially, if a debt has been re-aged, it appears as a newer debt.
Re-aging debt is almost always illegal, but in some cases, it can have both positive and negative impacts on a borrower. It is important to understand the ins and outs of re-aging debt to protect yourself and your credit score from illegal actions by debt collectors.
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What Is the Statute of Limitations on Debt?
To fully understand re-aging debt, you must first understand what the statute of limitations on debt is, and how it differs from re-aging debt. The statute of limitations on debt defines the legal period of time during which a creditor or debt collector can try to collect on an unpaid debt, or can legally file a lawsuit against you for payment.
If a creditor or debt collector wins a court judgment within the statute of limitations of your debt, they may pursue legal actions that include taking money from your bank account, garnishing your wages, or placing a lien on a property that you own.
The statute of limitations on debt collection is determined by the Fair Debt Collection Practices Act, as well as by state law. The statute of limitations for a debt may depend on the type of debt, or by the type of debt agreement.
In general, the statute of limitations for debts ranges from three to six years. State laws may determine when the statute of limitations begins: either on the date of the first delinquency — your first missed payment — or on the date of your most recent partial or full payment to the creditor. Re-aging a debt restarts the debt’s statute of limitations.
The second most important thing to understand about the statute of limitations is that it does not coincide with how long information will remain on your credit report. A debt that has reached its statute of limitations means that your creditor or debt collector may no longer sue you for payment, but the unpaid debt may still appear on your credit report.
Conversely, you could encounter a debt that has been dropped from your credit report, but is still within the statute of limitations for creditors and debt collectors to pursue payment from you. This means that even though your debt is no longer on your credit report, you still owe the debt.
If your debt has met its statute of limitations and a creditor or debt collector sues you for payment, you may appear in court and provide proof of the statute of limitations and the judge might dismiss your case.
How You Can Determine Your Debt’s Statute of Limitations
To determine your debt’s statute of limitations, you will need to understand:
- The type of debt you have.
- The terms of your debt.
- The state laws where your creditor is based.
- The state laws where you reside.
Typically, the state specified in the contract is the governing body the laws of which apply to the debt. If you live in a different state, a court may decide which state’s time period to use.
What Can Restart the Debt Statute of Limitations and Re-Age Debt?
A debt is re-aged if it previously met its statute of limitations and then was reopened. Re-aging debt may occur from a few actions.
- If a creditor asks about an old debt and the borrower speaks about it with the creditor. If you are unsure about whether an old unpaid debt has reached its statute of limitations, you should wait to find out if you are still legally responsible for the debt before discussing the debt with a creditor.
- The borrower makes a partial or full payment on an old debt after it reaches its statute of limitations, and the debt becomes re-aged.
- A debt was purchased by a collector in a secondary market and they intentionally illegally changed the first date of delinquency and re-aged the debt, or unintentionally did so.
- A borrower and creditor work out a repayment plan where the creditor agrees to stop reporting the account as delinquent if the borrower agrees to make payments.
When and How Is Re-Aging Debt Illegal?
It is illegal under the Fair Crediting Report Act for a lender or collection agency to change the date of when an account first went delinquent. Illegally changing the date of the first delinquency of an account can cause the outdated debt to remain on your credit report and cause serious damage.
Even if a debt is transferred or sold, the debt collector must report the same date of first delinquency to the credit bureaus as the original creditor previously reported.
How Does Re-Aging Debt Affect My Credit Score?
The term re-aging debt has a negative historical connotation from debt collection agencies intentionally and illegally re-aging debt to pursue payment on old unpaid debts.
Some collection agencies may purchase large portfolios of debt — including debts that have reached their statutes of limitations, and report all of the accounts to credit bureaus without checking each account. In doing so, they may unintentionally re-age an old debt, and it may appear as a new and unpaid debt on your credit history.
You can and should dispute a collection account that appears on your credit report after the seven-year reporting mark. To do this, you will need proof of the original account statements that show when the account became delinquent — your first missed payment.
You will need to dispute the account with each credit bureau that reports it, or you may choose to dispute the account with the collector, who will then need to report the account removal with all credit reporting bureaus.
Intentionally Re-aging Debt to Improve Your Credit Score
A lender or creditor may allow you to re-age your debt to repair your credit score if you have been missing payments and you are prepared to take responsibility for your debt. You can also sign up for a debt management plan, or a re-aging program where a credit counseling agency will negotiate with your creditors on your behalf.
You may be able to re-age your debt and reset your payment account from delinquent to current so that you can begin making on-time payments and rebuilding your credit. The record of your previously late payments will not be removed from your credit. You may need to wait seven years for the late payments to fall off your credit report.
You may choose to work with a legitimate credit repair company that can offer you guidance, financial counseling, and knowledgeable support as you get your debts, credit, and financial strategy in order.
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