Monday, February 10, 2014

A Hidden Credit Score Booster


Account re-aging can help you get back in good standing with your creditors and increase your credit score. Account re-aging means the creditor will no longer consider an account late and will no longer be reported on your credit report. 

Creditors will re-age your account once you have established a history of making payments on time.  A creditor may re-age a past-due account if you agree to enter a debt management plan. The revised payment plan can be negotiated between you and your creditor or with the help of a credit counseling service or a debt management company.  If you use a debt management or debt consolidation program make sure they are a reputable company and get the agreement in writing.  

An account is legally considered delinquent if a payment has not been received 30 days after the due date. Banks have 2 methods for reestablishing delinquent accounts: re-aging and a financial hardship program.  In the financial hardship program, you are given a fixed payment amount, and reduced interest rate for a year.  This helps reestablish trust with the bank. Re-aging helps you because:

  1. It stops late fees and over limit fees and allows more of your monthly payment to go towards the principal. This shortens the time it takes to pay off your debt.
  2. The creditor reports your account as current with the credit bureaus.  
  3. Although you still owe the debt you are no longer delinquent on the account.
For mortgage accounts that were previously late, if you have been current for the last 12 months, ask the lender to re-age your account. By doing this all the late payments over 12 months old will be removed from your credit report.
Federal regulations and creditor policies limit the number of times an account can be re-aged, so once you have re-aged an account continue making your payments on time. A creditor may only re-age an account once in a 12 month period and twice in a five year period for credit card accounts, and once in a five year period for other types of accounts. In June 2000, the Federal Financial Institutions Examination Council established new guidelines for issuers to follow when re-aging credit card accounts. To be considered for re-aging:

1.      The borrower should demonstrate a willingness and ability to pay.
2.      The credit card account should be at least 9 months old.
3.      The borrower should make at least 3 consecutive minimum monthly payments or the equivalent amount.

If a creditor agrees to re-age an account, ask them to confirm the details in writing. If the company refuses put the details of your re-aging program in writing.  Send a copy to your creditor by certified mail with a return receipt.
By re-aging an account, the company will remove all late payments and added interest, reduce the interest rate paid on the account, and bring your payments current. They will also report the payment arrangement to the 3 credit bureaus, Equifax, Experian and TransUnion and this will increase your credit score.


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