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When reaging a negative account is a good thing


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I just read this article, and it seems to pertain to credit card accounts. (Still with the OC and not in collection status).

Anyway, it appears that you can ask the creditor to re age the account for you. What this does is wipe out the history of the account and actually makes it appear as a new account. This is good if (1) the account is not a very old one, because you wouldn't want to lose points for losing a long history account) and (2) you have several late payments that the creditor will not remove.

The requirements are fairly easy, be in good standing for 3 months is one of them.

"Re-Age' Delinquent Accounts

So you're in serious trouble: You have delinquent accounts with late fees and over-the-limit charges. The good news is that you can improve your credit and decrease your debt by asking your creditors to "re-age" your accounts, says Lynnette Khalfani, a money coach and author of "Zero Debt: The Ultimate Guide to Financial Freedom."

What exactly is re-aging? Think of it as jumping into a time machine and heading back to those happy days before you ran into trouble. When a creditor re-ages your accounts, he wipes out all late payments from your credit history, Khalfani explains. (Mind you, that doesn't wipe out your debt.) It's a strategy often used by credit-counseling agencies for consumers who enter into debt repayment plans (DMPs), but individuals can give it a try on their own, too.

The catch: When an account is re-aged, it's basically reset in your credit report. If you've had that credit card for five years, for example, you'll lose those five years of credit history. (The length of your credit history also affects your score, so re-aging your oldest account may actually lower your credit score.)

You also need to qualify. Among the main requirements: The account needs to be at least nine months old, you have to make at least three consecutive, on-time minimum payments and you have to show willingness and ability to repay your debt (i.e., you need to have regular income). Want to prove to your lender you know what you're talking about? Mention to them that the specifics of re-aging are set up by the Federal Financial Institutions Examinations Council, outlined in its Uniform Retail Credit Classification and Management Policy. And be sure to ask nicely: Re-aging is done at the lender's discretion."

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I think that I would do a ton more research on this one. While it may be true that one or two companies out there may actually "wipe the slate clean" so to speak, I find it hard to believe that it would be true universally or even be the norm.

Here's my understanding of a typical re-age: they do not wipe out the history; they do allow you to go back to the original minimum payment (before it went delinquent) as well as stop overlimit &/or late fees; they also will report you as paying current, rather than as past due even if you are over the limit. I've even read where they will also reduce APRs on occassion during a "re-age". But you have to be deligent in your payments, because it is unlikely they will allow you to do the program over and over.

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This is what I have found, but still not very clear as to whether or not the history of lates are also wiped out as the article states.


Re-Aging, Extensions, Deferrals, Renewals, and Rewrites 3

Re-aging of open-end accounts, and extensions, deferrals, renewals, and rewrites of closed-end loans can be used to help borrowers overcome temporary financial difficulties,

{{6-30-00 p.5083}}such as loss of job, medical emergency, or change in family circumstances like loss of a family member. A permissive policy on re-agings, extensions, deferrals, renewals, or rewrites can cloud the true performance and delinquency status of the portfolio. However, prudent use is acceptable when it is based on a renewed willingness and ability to repay the loan, and when it is structured and controlled in accordance with sound internal policies.

Management should ensure that comprehensive and effective risk management and internal controls are established and maintained so that re-ages, extensions, deferrals, renewals, and rewrites can be adequately controlled and monitored by management and verified by examiners. The decision to re-age, extend, defer, renew, or rewrite a loan, like any other modification of contractual terms, should be supported in the institution's management information systems. Adequate management information systems usually identify and document any loan that is re-aged, extended, deferred, renewed, or rewritten, including the number of times such action has been taken. Documentation normally shows that the institution's personnel communicated with the borrower, the borrower agreed to pay the loan in full, and the borrower has the ability to repay the loan. To be effective, management information systems should also monitor and track the volume and performance of loans that have been re-aged, extended, deferred, renewed, or rewritten and/or placed in a workout program.

Open-End Accounts

Institutions that re-age open-end accounts should establish a reasonable written policy and adhere to it. To be considered for re-aging, an account should exhibit the following:

• The borrower has demonstrated a renewed willingness and ability to repay the loan.

• The account has existed for at least nine months.

• The borrower has made at least three consecutive minimum monthly payments or the equivalent cumulative amount. Funds may not be advanced by the institution for this purpose.

Open-end accounts should not be re-aged more than once within any 12-month period and no more than twice within any five-year period. Institutions may adopt a more conservative re-aging standard; for example, some institutions allow only one re-aging in the lifetime of an open-end account. Additionally, an over-limit account may be re-aged at its outstanding balance (including the over-limit balance, interest, and fees), provided that no new credit is extended to the borrower until the balance falls below the predelinquency credit limit.

Institutions may re-age an account after it enters a workout program, including internal and third-party debt-counseling services, but only after receipt of at least three consecutive minimum monthly payments or the equivalent cumulative amount, as agreed upon under the workout or debt-management program. Re-aging for workout purposes is limited to once in a five-year period and is in addition to the once in twelve-months/twice in five-year limitation described above. To be effective, management information systems should track the principal reductions and charge-off history of loans in workout programs by type of program.

I think it could still be helpful in some cases, either way.

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