What Is DLA? This Is Huge On Your Credit
Have you ever heard someone talk about the DLA or date of last activity of an account, having an affect on your credit?
Some of you may have heard about it and some of you maybe not.
Date of Last Activity has a big impact on your credit because it is basically all about payment history, and payment history affects 35% of your credit score.
The challenge with Date of Last Activity, is the term has changed meaning over time and creates a lot of confusion.
Date of Last Activity used to basically mean the last time anything happened with the account, some kind of “activity”.
A problem arose though.
Companies, especially collection companies, would essentially constantly update the date of last activity of the account. This would make it look brand new on the credit report, which caused two problems for the consumer.
First, because the account looks brand new, it has the most negative impact on the credit score possible.
Second, the time clock that determines how long the negative item can be on your credit report, resets.
You see, the law says that a potentially negative item can only remain on your credit report for seven years. This is so that we as consumers are not forced to carry the burden of a past accident or mistake forever, and allow us to recover and move forward again.
If the clock keeps resetting, the negative will never go away.
The federal government, when they became aware of this abusive tactic, changed the law in 2009.
At that point the DLA was changed to mean the last time a payment was made in good standing to the original creditor.
So, to illustrate:
If you have an account with ABC credit cards, and you go 30 days late this month, the Date of Last Activity clock starts ticking. If you pay it current, then you are back in good standing and the clock resets.
But if you continue to be late and the account goes 60, 90, 120 days late, and becomes a collection, the clock keeps ticking.
Now here is where it becomes important.
Once the account moves into a collection status, it can never go back to good standing.
Why is that important?
It is important because now the DLA can not legally change. And this is where the big credit challenges and confusion come into play.
Many companies are using the old concept of Date of Last Activity and these companies report it wrong on your credit, and it hurts your credit scores.
If you find this a little confusing, don’t feel bad, even many who work on credit get confused, and I can’t even count the number of companies that report the the credit bureaus, that don’t get it right.
So where does that leave us as consumers? Well, hopefully it means you now know that there is a good chance there are errors on your credit report, and that it might be a good idea to check your report. You might be getting hurt on your credit when you should not be.
You are probably also now thinking, it might cause problems if you are paying off collections, and you want to know more. You would be right. Going out and paying off collections on your credit can crush your credit score, if you are not very careful.
If you or anyone you know is facing credit challenges and would like so help, Heartland Credit Restoration is a great place to start. Call or email me for a free consultation. The same goes for those of you who have clients with credit challenges. Forward their contact info to me and I will be happy to give them a free consultation and see what we can do to get them back to you with loan ready credit.
Please share this with your friends and contacts on social media. I also welcome comments and encourage you to feel free to let me know if you have any questions. In the mean time, I hope you have a wonderfully blessed day!