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Closed accounts on your credit report may be bad or good for your credit score, depending on the details. Explore your options if a closed account has a negative impact.By Derek Moran | American Express Credit Intel Freelance Contributor 5 Min Read | November 30, 2020 in Credit Score At-A-GlanceClosed accounts can appear on your credit report for a number of reasons and aren’t always a bad sign. Depending on the specifics of the account, credit score shifts can be positive or negative. Information about closed accounts on your credit report isn’t there forever and can even be removed – under certain circumstances. What Is a Closed Account on Your Credit Report?Simply put, a closed account is one that has been shut off from future credits or debits. Many different types of accounts can be closed, like credit cards and auto loans. Checking, savings, and brokerage accounts can also be closed. There are several reasons why an account might be closed:
It’s easy to forget about an account after it’s closed but that doesn’t
remove it from your credit report. How Long Does a Closed Account Stay on Your Credit Report?Generally, how long a closed account stays on your credit report depends on the standing of the account when closed. Accounts closed in good standing can remain for 10 years and are often beneficial to have on your credit score. This is because reliable payment history is the most influential factor in the FICO credit scoring model.1 There’s usually no reason to remove accounts like these. Information about negative closed accounts – ones with defaults or late payment histories – lingers for less time: seven years, by law. The only negative information that can stay for longer is a Chapter 7 bankruptcy, which stays on credit reports for 10 years.2
How Closed Accounts Affect Your Credit ScoreUnderstanding how closed accounts affect your credit score can seem a bit contradictory, at times, to what you might think. For instance, paying off an auto or home loan is considered a good thing, financially. But it can result in a temporary dip in your score because it reduces the variety of credit types in your mix. Lenders usually prefer borrowers who have learned to handle a good mix of loans and credit lines. If you don’t use a credit card, it may seem logical to close the account. But closing a credit card would lower your overall credit limit, which can raise your credit utilization and that, in turn, would negatively affect your credit score. Experts recommend keeping credit utilization under 30% but people with the very highest credit scores generally keep it under 10%. Closed accounts with remaining balances – like a canceled credit card account with an outstanding balance – can also affect your score negatively. If the account defaulted, it could be transferred to a collection agency. Paying off closed accounts like these should improve your credit score, but you might not see an increase right away. How to Get Rid of Closed Accounts on Your Credit ReportThere are a few ways to go about getting a closed account off your credit report. If the closed account is an error – or fraudulent – the Fair Credit Reporting Act requires that the credit bureaus and information providers correct the information in your credit report. This is a pretty straightforward process you can learn more about by reading “How do I Get Something Off My Credit Report?” and “How to Dispute Your Credit Report at All 3 Bureaus.” If the closed account is verifiable and legitimate – and has negative information like an outstanding balance or a history of late or missed payments – you still have a few options to remove it:
The TakeawayClosed accounts can help or hurt your credit score. It’s important to take the time to review your credit report regularly and verify your account information. If closed accounts are hurting your score, you may have options to remove the information from your credit report. Taking a proactive approach to your credit history and using the tools available to update or correct your credit report can help you in the long run. Derek Moran is a freelance writer and researcher whose work focuses on digital marketing and financial services. All Credit Intel content is written by freelance
authors and commissioned and paid for by American Express. The material made available for you on this website, Credit Intel, is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors. Can I remove closed accounts from credit report?You cannot remove a closed accounts from your credit report unless the information listed is incorrect. If the entry is an error, you can file a dispute with the three major credit bureaus to have it removed, but the information will remain on your report for 7-10 years if it is accurate.
How long does it take for closed accounts to be removed from credit report?An account that was in good standing with a history of on-time payments when you closed it will stay on your credit report for up to 10 years. This generally helps your credit score. Accounts with adverse information may stay on your credit report for up to seven years.
Should I pay off closed accounts on credit report?If the account defaulted, it could be transferred to a collection agency. Paying off closed accounts like these should improve your credit score, but you might not see an increase right away.
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