Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com.
Dear To Her Credit,
How many times can a creditor sell my old debt to other
businesses? I have an old debt from 1989 and different companies
"buy" my old bill, so that it stays on my credit reports. It just
goes on and on and on. -- Anita
Dear Anita,
Negative credit information stays on a report for seven
years. You would surely think a bill from 1989 would be long gone by now.
It's not always that simple, however. When you say
"from 1989," is that when you took out the loan? Or is that when you
made your last payment, or possibly when you talked to the creditor? It makes a
difference.
Rod Griffin, Experian's director of public education, says,
"The original delinquency date, or date of first delinquency, is the date
from which the seven-year period is measured. The seven-year period is measured
from the original delinquency date after which the account was never again
current. That is what causes the confusion."
People often ask if the seven-year period resets if they
make a payment. It does not reset, per se. It's a separate delinquency and date.
Griffin explains: "It is possible for an account to have more than one
original delinquency date" if the consumer restarted payments and then defaulted again. "For example, if a person is late this month, they
would have an original delinquency date in June. If in July they made two
payments, the account would become current. If they then missed a payment in
August, they would have a second original delinquency date because the account
was current between the two missed payments. The first late payment would be
deleted seven years from June; the second would be deleted seven years from
August."
If it were shown in a grid it would look something
like this (C=Current, L=Late):
C
C
L
C
L
L
L
L
April
May
June
July
Aug.
Sept.
Oct.
Nov.
If the account were never again brought current after the
August missed payment, the account would eventually be charged off and sent to
collections. Because it was never again current, seven years from the August
missed payment, the original account and any subsequent collection would be
deleted.
Neither interest charges nor your account being sold to
another collection agency has anything to do with your delinquency date. "Again,
there would likely be a new 'date of last activity' each month, but it has no
bearing whatsoever on when negative information is deleted," says Griffin.
"Federal law requires that lenders report the original delinquency date of
the account, and that collection agencies carry over that date so that any
collection account can be deleted at the same time. A collection account is
considered a continuation of the original debt."
It is a violation of law for a collection agency to report old
past-due amounts as if they are new again when the debts are sold. If an agency
persists in reporting old debts with "updated" activity dates, you
may have a legal case against them. Georg Finder, an independent credit evaluator, knows of plaintiffs who have been awarded damages
in cases where collection agencies have willfully disregarded the rules and
caused financial harm to the plaintiffs. He says, "It is very important
that good records of the account charge-off, and of subsequent collection
activity, be kept by the consumer to document the abuse and violation to her."
Here's what you should do with an old debt still showing up
on your credit report:
1.
Check your credit report and make sure the old
debt -- not some more recent one -- is actually showing on your report.
2.
If it's still being reported, send a letter to the collection agency that currently holds the debt, and tell them to stop
reporting this to the credit reporting agencies or you will protect your
rights.
3.
Send letters to all three credit reporting
agencies and tell them why the debt should not be on your report.
4.
If that does not correct the problem, seek legal
help. Contact your bar association or a low-cost legal help organization.
Sally Herigstad answers questions about credit every week for CreditCards.com. Herigstad is a certified public accountant, author and speaker. She also writes regularly for MSN Money, Interest.com, Bankrate.com and RedPlum.com, and has been a guest on Martha Stewart radio and other programs. You can read more about personal finance and download free budgeting worksheets at her website: www.sallyherigstad.com
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
Published: June 10, 2011
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