By Daniel Poulos
Vice president
Mortgage Works/elite Lending
How Delinquencies Can Disappear
The re-aging process may help erase late payments from clients’ credit reports
Many mortgage borrowers are unaware of what re-aging credit is and how it can affect them. When used legally and proactively, this process can essentially
make late payments disappear from
their credit reports.
A basic concept of credit is that
a debtor — or borrower — must pay
back any debt they accrue to the creditor within a specified period of time.
Re-aging credit refers to readjusting
this period of time to alter the debtor’s credit history. there is positive re-aging, which is legal, and negative
re-aging, which is not.
Mortgage originators and brokers
who understand the credit re-aging
process can aid clients who have late
payments on their credit histories determine if it will help them.
Beware negative re-aging
the Fair Credit Reporting Act (FCRA)
states that a debt becomes delinquent
when a payment is 30 days late. From
the date of the first delinquency, this
information will remain on the debtor’s credit history for seven and a half
years, after which it must be deleted.
When payments are overdue by 180
days, the creditor can begin the charge-off process. this has a negative impact
on a credit history, and the creditor or
any debt-collection agencies it has employed can report it to the credit-report-ing agencies.
this is the point where illegal re-aging may occur. FCRA states that a
charge-off can only be reported in a
credit history for seven and a half years
from the date of the first delinquency.
this date cannot be changed. As debts
are transferred to collection agencies,
however, these organizations often
attempt to report a more recent delinquency date, thereby extending the period in which the charge-off is included
in a credit history.
in situations where a debtor has been
short of money only temporarily.
Debtors must prove to the creditor that
they have the means to make regular
repayments, as well as to repay the
missed installments. the creditor is
not obligated to re-age the debt, but
it may do so if it is confident that the
loan will be repaid.
On;the;Web
“A basic concept of credit is that a debtor —
or borrower — must;pay;back any debt
they accrue to the creditor within a specified period
of time. Re-aging credit refers to readjusting this
For more information on the Fair
Credit Reporting Act, visit sctsm.
in/FCRA.
Creditors and debt-collection agencies often do this to extend the period
of time they have to attempt to reclaim
the debt. this is not only illegal, but it
also will negatively impact the debtor’s
ability to get credit for a longer period.
Power of positive re-aging
In an attempt to make their credit history more acceptable, many people will
allow their creditors to re-age their debt
the positive, legal way.
As previously stated, a creditor can
begin a charge-off process after 180
days. this is basically a declaration
that it does not expect the debt to
be repaid and is damaging to a credit
history. Before this occurs, however,
the creditor may be prepared to re-age the debt.
Re-aging credit legally means effectively clearing any delinquencies from
a debt once there is an agreement
that the debtor will begin to make
payments on time again. If a creditor agrees, it will begin to report the
debt as being current rather than delinquent. Any late payments will be removed from the credit report, and the
debtor’s credit history will appear to be
positive again.
this will only happen at the debtor’s
request, however. If you have a client
with an otherwise acceptable credit
profile who for some reason made a
late payment, it might be worth asking the creditor to consider re-aging
the account.
For this to occur, the creditor must
be satisfied that payments will be
made. therefore, it is most applicable
Although this will result in certain
negative aspects being removed from
a credit report, there is a drawback: Re-
aging effectively reduces the length of
the debtor’s credit history, which can
make creditors less confident about
lending. the compensation, however,
is that there will be no delinquencies
on the credit history. this should be a
bigger contributing factor in achieving
a respectable credit score.
• • •
Risk-based pricing and tighter credit
guidelines have made mortgage origi-
nators acutely aware of how important
a few additional points can be on a
credit score. Carefully analyzing your
clients’ credit reports should make it
relatively apparent whether re-aging
an account is likely to improve their
scores. It could be the difference be-
tween loan approval and denial. •
Daniel Poulos, vice president of Mortgage
Works/Elite Lending in North palm Beach,
Fla., has been servicing the mortgage needs
of palm Beach, Bro ward and Martin counties
for two decades. His columns on consumer
awareness and protection have appeared
locally and nationally. He frequently appears
on ABC-t V News and was also the co-host of
the Sunday morning sho w “Real Estate Insiders” in West palm Beach. Reach him at (561)
575-5626 or DJpoulos@elitelending.biz.
