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, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.
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
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):
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.
Take care of your credit!
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