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If youre one of the many Americans who are lying low and waiting for old collections to fall off your credit report, you may be in for a nasty shock. Some unethical collection agencies tamper with the dates they report to the credit bureaus. By changing the dates associated with the account, the collection agency can ensure that a derogatory entry remains on your credit report for longer than the law allows. This process is known as "re-aging" and it is illegal.

How Debt Collectors Re-age Debts

You may end up waiting longer than 7 years...

Lets say your original debt was a defaulted credit card debt and you stopped making payments in January of 2005. In June of 2005 – 180 days later – the credit card company assigns your defaulted account to a collection agency and updates your credit report to lect that the debt you owe was charged off. When the collection agency gets the debt, it adds a new derogatory trade line to your credit report. Now you have both the original creditors derogatory entry and one from a collection agency.

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 dont 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 creditors charge-off. In other words, it simply isnt 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

Dont confuse the statute of limitations for lawsuits with the credit reporting periods statute of limitations. These are two totally different time frames. The statute of limitations for lawsuits ers 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 creditors derogatory information is gone but a collection agencys negative trade line lingers on your report, theres 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 lected in the original creditors trade line prove your claim of re-aging – but thats much harder to do once the original creditors trade line ages off your account. Most credit card companies dont 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 wont 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.

When you are applying for a car loan, the loan amount will include the appropriate taxes for the vehicle, the accumulated interest or cost of borrowing for the vehicle. All these costs will add up to a total amount that will be financed over a determined term. It is no surprise when you are trying to break the loan in its early stages you will face these penalties when attempt to break the contract.

Open ended loans is a loan that can be paid off any time without additional interest penalties from the manufacture. Which means if you have means to pay off your 60 month car loan in 32 you will not face any additional interest charges. Close ended loans means you must pay the interest promised to the lender regardless if you pay off the loan earlier than the loan term. It is usually more costly to terminate a close ended car loan versus an open end one.

It is no surprise when you are breaking your financial contract early you will have to pay the penalty which is also known as negative equity. To re-finance the previous debt attached to your car again in a new loan is illegal in Canada. But due to change of your life style or living situation some one may be forced into refinance the old debt. To hide the negative equity that is less than 10% of the purchasing price of your new vehicle is not difficult to obtain. Many dealers today will simply turn a blind eye just to have your business. But when the amount is noticeable by the bank it is lot harder to deal with and it will take a lot more creative thinking to get you approved. Many dealers may sell you added options that are purely for the purpose of hiding this bad debt.

The point you should take away from this article is to try to avoid negative equity at all cost possible, because this phenomena if not treated carefully can have you buried with financial burden that will be hard to clean up. If you are currently carrying negative equity in your car loan, one should wait until the debt is completely paid off before venturing into a new loan.