I recently had a client that wanted to get approved for a mortgage but he unfortunately had some late payments on a credit card that was affecting his score badly. It was definite that in order for him to qualify for the loan he would need to get the late payments off his report somehow. Luckily, I was able to help him on getting the late payments removed though re-aging the credit card account.
Before I start, I want to make it clear that this post is referring to positive re-aging credit. This is 100% legal. We are not discussing re-aging negative marks. Re-aging negative marks is illegal (we hope to discuss that at one point in a separate post.)
Re-aging credit basically works as follows. Creditors, lenders, and banks are all in business to make money and not to damage people’s credit. A bank makes money when you repay them the money you borrowed from them (plus interest). That’s where re-aging comes into the picture. A re-aging agreement is an agreement with the bank that if you pay up your balance then the bank will report your account as current and will remove the late marks from your credit report. Banks agree because at the end of the day they are getting back their money!
Is Re-Aging Credit Legal?
Yes. Re-aging credit is a legal practice but according to the rules of Federal Financial Institutions Examination Council (FFIEC), in order for an open end loan (credit card or any loan that does not have a end date) to qualify for re-aging it must have the following guidelines:
1) The account must be at least nine months old.
2) The consumer needs to provide a reason why he thinks he will not be late again on the loan.
3) The consumer must have made on time monthly payments for a minimum of three consecutive months.
4) The bank could only re-age an account once in a 12 month period and twice in a five year period.
Closed end loans (mortgages or loans that have a fixed amount of years) have slightly different guideline,as follows:
- It can only be re- aged once in 5 years.
- Mortgages usually need to have 12 consecutive months of on time payments before a bank will be willing to re-age the loan.
Which Banks Offer A Re-Aging Program?
Is It Possible To Re-Age An Account Without Paying The Balance In Full?
It is possible to re-age a account without paying up the balance in full. But again, banks want their money so it definitely makes it a lot easier and more likely to get the bank to agree if you offer to pay up the full remaining balance.
Is A Charge Off or Collection Loan Eligible?
No. Once the account is in charge off or collection stats it will not anymore be eligible for the re-aging program. But, you can still try to cut a deal with the bank as a pay to delete agreement. Sometimes the bank will agree.
Is Re-Aging Credit A Good Deal?
When your have balances that are over due the bank will do anything to try to get back as much money as possible and many times you can negotiate to have the debt payment reduced to a fraction of what you owe, but in order for the negotiation stats to begin, the debt needs to be in charge off stats. At that point, as discussed above, re-aging is no more possible. So if you ask me, which deal is better: re-aging and save your credit, or, leave your credit damaged but get a better deal on the repayment? Obviously, if you can afford the payments then it’s recommended to save your credit and go for the re-aging deal. But of course, every individual case is different, so it is always recommended to discus your options with a lawyer or a certified debt counselor.
Wishing you lots of successes on improving your credit!
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