DEFINITION of ‘Re-Aging Debt’
Restarting the clock on a debt’s statute of limitations. Re-aging debt can happen if you talk to a creditor about an old debt or make a payment on an old debt. Re-aging debt is good for debt collectors because it gives them greater legal ability to collect a debt. Re-aging debt is usually bad for consumers because it puts them back on the hook for paying an old debt.
BREAKING DOWN ‘Re-Aging Debt’
If a creditor contacts you about repaying an old debt, it’s best not to say or do anything until you find out whether you legally owe the debt. If you accidentally re-age the debt, you could become responsible for paying something that was past the statute of limitations or that you previously had discharged in bankruptcy or settled with a creditor. Or, you could find yourself with the hassle of proving that the debt isn’t yours while trying to make sure the creditor doesn’t report the unpaid debt as delinquent and tarnish your credit report. This could happen because old, unpaid debt gets bought and sold by debt collectors in a secondary market, and these collectors often have no idea whether the debt they’re purchasing is legitimate, was the result of identity theft, was paid off, was forgiven by the creditor or is past the statute of limitations.
The reason the age of a debt matters is because of the statute of limitations. This period typically lasts from three to 10 years depending on the state of jurisdiction that applies to the debt and the type of debt. Once this period is up, a creditor can’t sue a consumer for an unpaid debt. So if you acknowledge an old debt by agreeing that it’s yours or by making a payment on it, however small, that three to 10 year period starts over and you’ll either have to pay the debt in full, reach a settlement, or go through the same process that you went through the first time to avoid paying it.
Unethical debt collectors might also illegally re-age a debt by reporting it to credit bureaus after they purchase it in the secondary market, even though they have no idea how old it is or whether you really owe the money. If this happens, you can report the debt to the credit bureau as inaccurate, which should result in the debt collector having to prove the validity of the debt. If they can’t, it would be removed from your credit report.
Re-aging is generally bad for your credit report because it increases the amount of debt you owe and because it can put a delinquent debt back on your credit report that had fallen off after the seven-year limit. Greater amounts owed relative to your total available credit and delinquent debt are both things that can significantly lower your credit score and make it more difficult or more expensive to obtain new credit.
There is one good type of re-aging, and that occurs when you work out a debt repayment plan with a creditor and they agree to stop reporting your account as delinquent. Instead, they re-age your account and report it as current, which can help your credit score.