How Debt Collectors Re-age Debts
|You may end up waiting longer than 7 years...|
The Fair Credit Reporting Act dictates that most debts can only remain on your credit report for 7 years and 180 days from the date of first delinquency. The date of first delinquency is the date that your payments to the original creditor were first classified as late.
What many debtors don't realize is that the DOFD applies to all entries for a given debt. Because few creditors send accounts to collection agencies until they are 180 days' delinquent, collection agency entries rarely remain on debtors' credit records for the full 7.5-year period. The absolute latest a collection account should disappear is at the same time as the original creditor's charge-off. In other words, it simply isn't legal for a collection agency to leave derogatory information on your credit report for longer than the original creditor.
SOL and the Credit Reporting Period
Don't confuse the statute of limitations for lawsuits with the credit reporting period's statute of limitations. These are two totally different time frames. The statute of limitations for lawsuits refers to the amount of time a debt collector can legally sue you in your state. Each state has different statutes of limitations. The credit reporting period – 7.5 years – is federally mandated and the same in every state. Generally the statute of limitations for lawsuits expires long before the credit reporting period.
This is covered in more detail here: The Credit Reporting Period vs. the Statute of Limitations
Re-aged Collection Accounts
If you pull your credit report and the original creditor's derogatory information is gone but a collection agency's negative trade line lingers on your report, there's a good change the collector re-aged your debt.
|Re-aging sets back the clock on your debt.|
When a debt collector re-ages accounts, it reports a date of first delinquency that is much later than the actual DOFD. In the above example, our DOFD was January of 2005. The collection agency gets the account in June of 2005. If the collection agency reports the date of first delinquency as the date it received the account – in June – the derogatory information will remain on your credit report until June of 2012, rather than being removed in January of 2012, as federal law dictates it should be.
Although clearly illegal, this nasty little trick is incredibly common. I see it literally All. The. Time. A collection agency that regularly alters the dates on its accounts could theoretically ensure that a collection account remains on your credit report indefinitely.
What To Do About Re-aged Collection Debts
Removing a re-aged collection account from your credit report is much easier if you have proof to back up your claim of re-aging. This is one reason I recommend that all individuals print out their credit reports from each credit bureau once each year. The dates reflected in the original creditor's trade line prove your claim of re-aging – but that's much harder to do once the original creditor's trade line ages off your account. Most credit card companies don't keep charge-off records longer than 18 months, so getting proof from the original creditor after the fact is difficult, if not impossible.
If you have proof, send it to the credit bureau along with a letter explaining that the collection account is obsolete and should have been deleted, as the 7.5 year period for that particular debt has already passed. Make sure to use the word "obsolete" in your dispute. Disputes are coded and while I won't get into that right now, I will say that you want your dispute to have the "Obsolete" code.
You can also take your re-aging issue up with the collection agency itself. A well-written "I have every right to sue you" letter along with proof of the re-aging is often enough to coerce debt collectors to remove derogatory information from your credit report. Make sure you point out that you want the trade line deleted. Anything less is against federal law.