When a creditor sells an account to another entity, and the purchasing company intends to convert and report the prior account history, it is essential that the transaction is reported accurately and transparently. This situation is different from a simple transfer or account closure, as it involves both a change in ownership and the continuation of historical account data.
Proper handling ensures that credit histories remain intact and the data furnisher remains compliant with the Fair Credit Reporting Act (FCRA).
Why Accurate Reporting Matters
- Maintains the continuity of a consumer’s credit history
- Avoids confusion or misrepresentation of obligations
- Helps lenders correctly evaluate long-standing repayment behavior
- Complies with Metro 2® and FCRA guidelines for sold debt
Reporting Responsibilities
1. Original Creditor (Seller) Reporting
The original creditor must:
- Update the account status to reflect that the account was sold to another company
- Set the Account Status to “Sold to another lender”
- Report the Balance Amount and Scheduled Monthly Payment Amount as zero
- Retain and report the complete payment history through the date of sale
- Apply a Special Comment Code such as:
- “Account transferred or sold”
This ensures that the account is properly closed on the original creditor’s side without deleting valuable repayment history.
2. Purchasing Company (New Owner) Reporting
If the purchasing company chooses to convert the original history into its system, it must:
- Create a new tradeline under its name
- Retain the original Date Opened from the seller’s record
- Continue reporting the same payment history, status, and DOFD (Date of First Delinquency)
- Reflect the full balance and any ongoing payment obligations
- Apply a Special Comment Code such as:
- “Account acquired from another lender”
This ensures the account reflects a seamless transition with no credit reporting gaps.
Important Reporting Considerations
- Do Not Duplicate Payment History: Only one active tradeline should report the balance and ongoing activity.
- Preserve DOFD: This is critical for determining when any delinquencies or derogatory information must be removed under the FCRA.
- Report Dates Accurately: Maintain accurate Date Opened, Date Closed (for seller), and Date of Last Payment.
- Use Unique Account Identifiers: The new owner should assign a unique account number to avoid confusion.
FCRA Compliance Requirements
To ensure compliance with the FCRA:
- Report accurately: Clearly indicate the sale and the assumption of history by the purchaser.
- Be complete: Include all prior activity, relevant dates, and balance information.
- Be timely: Submit updates as part of the regular monthly reporting cycle.
Impact on the Consumer’s Credit Report
- No Disruption to Credit History
The continued reporting of the account, including past payment activity, helps preserve credit age and positive history. - Prevents Score Fluctuations
Keeping the original open date and repayment data prevents artificial score drops that could result from a perceived “new” account. - Supports Transparent Lending Decisions
Future lenders can clearly understand the full context of the account without requiring explanations from the consumer.
Conclusion
When a creditor sells an account and the purchaser assumes and reports the prior history, both parties must handle the reporting with precision. By updating account statuses, preserving payment history, and ensuring consistency in reporting, furnishers support FCRA compliance, consumer credit integrity, and industry trust. This approach helps ensure a smooth and accurate transition of account ownership on the consumer’s credit file.