An account is considered transferred when a lender or servicer moves the account—typically a loan—from one institution to another. This may occur due to loan servicing changes, mergers, sales of loan portfolios, or third-party servicing agreements. Proper reporting is essential to ensure that consumers’ credit reports reflect an accurate, uninterrupted history of the obligation and that data furnishers remain compliant with the Fair Credit Reporting Act (FCRA).
Understanding Transferred Accounts
A transfer is not a settlement, closure, or charge-off. Instead, it reflects a change in who services or holds the debt—not the termination of the borrower’s responsibility. Both the original and new furnishers have specific responsibilities when reporting these accounts.
Steps for Reporting Transferred Accounts
1. Original Creditor: Update Account to “Transferred” Status
The lender that transferred the account must:
- Change the Account Status to “Transferred – Closed” or a similar code reflecting that the account is no longer active with them.
- Set the Balance Amount and Scheduled Monthly Payment Amount to zero.
- Retain and report the full payment history and Date of First Delinquency (DOFD).
- Include a Special Comment Code such as:
- “Transferred to another lender” or
- “Account sold to another lender”
This ensures the account does not appear open or active on the consumer’s credit report after the transfer.
2. New Lender or Servicer: Open a New Tradeline
The new lender or servicer must:
- Create a new account entry (tradeline) with a new Account Number and Date Opened reflecting when the account was received—not the original open date.
- Report the full balance and scheduled payments as of the date of transfer.
- Ensure payment history either resumes seamlessly (if they are importing history) or starts fresh, depending on the agreement.
- Use a Special Comment Code like:
- “Account acquired from another lender”
This helps distinguish the new tradeline from one originated directly by the new lender.
Key Reporting Considerations
- Do Not Report the Same Account as Open in Two Places: Once transferred, the original account should no longer be reported as open or carrying a balance.
- Avoid Duplicating Payment History: Only one tradeline should carry the full payment record if the new servicer does not continue the history.
- Maintain DOFD: If the account is delinquent, the new lender must retain and report the original Date of First Delinquency to ensure accurate retention periods.
FCRA Compliance Requirements
To meet FCRA standards, all information must be:
- Accurate – Correctly distinguish between old and new accounts, balances, and ownership.
- Complete – Maintain key date fields and use comment codes to provide full context.
- Timely – Reflect the transfer as soon as it occurs to prevent dual reporting or consumer confusion.
Impact on the Consumer’s Credit Report
- Continuity of Credit History
Accurate transfer reporting ensures that a consumer’s credit history reflects uninterrupted account activity—even through a change in lender or servicer. - Avoids Duplicate Accounts
Clear distinction between original and new tradelines prevents the appearance of multiple open accounts for the same obligation. - Transparency for Lenders
Lenders can better assess credit risk when account transfers are properly coded and complete with balance, history, and dates.
Conclusion
Transferred accounts must be handled with care to preserve credit continuity and transparency. By accurately closing the original account, initiating a new tradeline with appropriate details, and reporting to all consumer reporting agencies (CRAs), furnishers uphold their FCRA obligations and protect both lenders and consumers from confusion or credit misrepresentation.