Loan reassignment refers to the process of one loan holder selling your loan to another company. This is quite common with mortgages; they are often reassigned to another company that buys them in anticipation of reaping the profits from the interest you are paying. This can happen with other types of loans as well. This can hurt your credit score, even if you never make a late payment or have any other problems with paying the loan.
What You Should Know About Your Credit Score
Most people think their credit scores primarily come from an assessment of whether they pay their bills on time. This accounts for only 35 percent of your score. Other factors include: the amount you owe and how much of your available credit you are using, at 30 percent; the mix of credit, meaning credit cards and installment loans, at 10 percent; the number of new credit applications, at 10 percent; and the length of your credit history, at 15 percent. The last category, length of your credit history, is the one that can be affected by loan reassignment.
What Happens if the New Company Treats Your Reassigned Loan Like a New Loan
When you receive notice that a new company has taken over your loan --- that is, it has been reassigned --- check to see if it has assigned you a new account number. Your credit score can be adversely affected because a shorter credit history with a company lowers your credit score with the credit rating agencies.
A Mix of Credit will Help Protect Your Credit Score
According to Bankrate, credit reporting agencies look to see if you have a variety of loans. If you have revolving credit, such as credit cards, and installment credit, such as mortgages and car loans, your score goes up. The thinking is that this mix shows you can handle money. Your reassigned loan falls in the installment category, so you won't experience a major drop in your credit score if you have credit cards and other installment credit.
Some Remedies for Repairing Your Credit Score After Reassignment
It is unlikely that you can ask the new company to list your account as older than the date it bought your loan, but you can call the credit reporting agencies and point out that the loan existed long before it was reassigned. Additionally, if you make your payments on time, avoid applying for any new credit for a year, and reduce the amount of available credit you are using by paying down credit card amounts that are close to your credit limit, you can repair any damage done to your credit rating by a reassigned loan.
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