What is a Re-Age?
I get two types of clients:
One type wants to regain control of their finances: their goal is to resolve their delinquencies as soon as possible and return to normal.
The other type wants an exit strategy: they want to settle all of their unsecured debts.
If your accounts are not charged off and you’re the type that wants to regain control of your situation as soon as possible, you need to know about re-ages.
If your accounts are charged off or if you're looking for an exit strategy, please refer to my 4-part series about how debt settlement works.
Re-aging is an excellent tool for someone who is behind but has not charged off on their credit card debts. A re-age works like this:
Let's say you're 4 months behind on your credit card. Your normal payment on the card is $300, so your most current statement will reflect your amount due as $1,500. The $1,500 represents the $1,200 for the 4 months you're behind, plus $300 more for the current amount due.
A re-age is a payment plan to pay your normal amount due, in this case $300, for 3 consecutive months. Once you make the third payment to your credit card company, they will no longer require the other $1,200 that was due and they will bring your account current.
Once the account is brought current, you pay your normal payment from then on.
If a concern of yours is your future ability to qualify for new credit, you should know that once the account is brought current, you will satisfy the delinquency and begin to recover.
An advantage that re-aging has over credit counseling is that when you're in a debt management plan, your creditors will report that on your credit report. Generally speaking most lenders will not lend to you while those remarks exist.
Which means if your debt management plan is slated to last 5 years (and you stick with it), expect that remark to exist for 5 years, and for it to be difficult to achieve any financing during that time.
Whereas when you re-age, your creditors will bring your account back to a R1 Status (current) after 3 months with no future remarks.
Once all of your delinquent accounts have been settled or re-aged for 2 years, you will generally acquire new, unsecured credit or reasonable financing on auto and home loans.
For more information please see: Credit scores when paying or settling collections and charge-offs.
If my clients lack enough funds to settle all of their delinquent accounts right away, I commonly work out re-ages on their remaining delinquencies.
The reason I do this is so my client can recover and not be exposed to the dangers of not paying their bills for a long period of time.
When my clients decide to re-age some of their accounts, I go with the strategy of settling the ones that will settle for the least amount - percentagewise. This way my clients can settle as much debt as they can with their available funds.
By re-aging accounts, preferably low-balance ones, it creates opportunities for you to have active tradelines that are reporting active payment history on your credit report. This way you would immediately have existing tradelines that in theory will help rebuild your credit score more quickly.
Re-aging accounts allows you to solve your problem and eliminate the adversarial exposures as you payoff the remaining accounts in a non-reckless way.
The advantages to this approach are: you will gain control over your finances by lowering your monthly bills, you will resolve your delinquencies and begin to recover, you will have active payment history reporting to your credit reports, and you will avoid the risks that are associated with settling their debts over a long period of time.
Here's an example...
By negotiating with all of the accounts simultaneously, with the goal of settling them right away, it puts a consumer in a position where their accounts can be comfortably negotiated for the lowest settlement percentage possible. With the likelihood that once the accounts that will settle for the least amount are identified, they can re-age and bring current any remaining accounts.
In the above example, if the consumer was able to settle for an average amount of half of what they owe, they would eliminate $50,000 in debt and $1,250 in minimum payments.
And they would do so while minimizing the dangers of debt settlement that would exist if they settled their debts over a long period of time.
They would go from having a $500 negative monthly cash flow to a $750 positive one. This isn't the result for everyone naturally, as some financial resources that are utilized to settle right away may come with a cost. The true savings is situational and dependent on the resource itself.
From my experience, the range of monthly savings achieved by using the various financial resources that are commonly used is generally 50-100% of the previous monthly cost of the related debts.
Combining a debt settlement strategy with re-aging may enable you to solve your income/expense problem and return you back to normalcy in a matter of a few months.
Re-Ages and Interest Rates
You can generally achieve a lower interest rate when you re-age as well. When you fall behind on your credit cards, you will generally trigger the default interest clause when you become delinquent by 60 days or more. Default interest rates are ridiculously high. So when you re-age, it is critical you confirm the interest rate and it's wise to try to negotiate it even lower.
Who does Re-Ages?
Bank of America, Chase, Wells Fargo, Citibank, US Bank, Credit Unions, pretty much any financial institution that services credit cards.
How do I qualify for a Re-Age?
It's not really a matter of qualifying. The only prerequisite is that the account must be re-aged before it charges off. If it charges off, re-aging will no longer be an option.
If your accounts are charged off, the only way to satisfy them in order to rehabilitate and recover is by either paying them off or settling them. Unfortunately, once your accounts charge off, your delinquency won't be satisfied while you're making payments. Satisfaction won't be achieved until the final payment is made.
I hope this article explaining re-ages helps you. Please feel free to contact me with any questions.