Just because you’ve closed an account (and mentally moved on from an old credit card or loan) doesn’t mean the information will automatically disappear from your credit report. That account can continue to impact your credit score for years — in good ways and not-so-good ways.
There are a few different things you can try if you want the account removed from your credit reports, but it may take some time. And since a closed account can sometimes have a beneficial effect on your credit score, you might decide it’s best to simply leave it alone.
Read on to learn more about how an account can continue to impact your credit even after it’s closed, and how to get a closed account off your credit report.
What Happens When You Close an Account?
When you close an account, your credit reports will reflect the account’s new status. But information about the closed account — including how much you borrowed and your payment history — may still be used to calculate your credit score and inform lenders about your overall creditworthiness.
Even if you’ve paid every penny you owe, the account still may be included in your reports. And if you have an outstanding balance, you can expect payments and other activity to show up on your reports every month.
The Fair Credit Report Act — the federal law that regulates how consumer credit agencies handle and report information — allows the credit bureaus to include positive and negative information about closed accounts on a credit report for several years.
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How Can Closed Accounts Affect Your Credit?
Closing an account can affect your credit in ways both good and bad. Here’s a look at what can happen in the months and years after you close an account.
An Unexpected Credit Score Dip
Something that surprises a lot of people is that closing an account can actually have a negative impact on credit scores — even if the account was in good standing. That’s because closing an account can affect certain factors that go into calculating your FICO Score. The dip may be temporary (as long as you stay on track with managing your debt), but here’s what’s behind it:
Credit Utilization Ratio
Your credit utilization ratio — which represents the amount of your available credit that you’re currently using — is part of the “amounts owed” category which determines 30% of your FICO Score.
If you close an account and the amount of credit available to you is reduced, that can affect your ratio. And a higher credit utilization ratio can mean a lower credit score.
Length of Credit History
Closing a long-held credit card account can also affect the “length of credit history” category which accounts for 15% of your FICO Score. FICO looks at the age of your oldest account, the age of your newest account, and the average age of all your accounts. So closing an older account after you pay it off can lower your score.
FICO also looks at your “credit mix” when it’s calculating your overall score, so it can help if you have both revolving debt (with a credit card or line of credit) and some type of installment debt (such as a student loan, personal loan, car loan, or mortgage). Your credit mix is 10% of your FICO Score.
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But There May Be Good News, Too
Should you still decide to close your account, there is some happy news: If you did a good job of managing that particular credit card or loan, the information can stay on your credit reports for up to a decade, continuing to boost your credit score. However, the bump from a closed account may not be as significant as from an open one.
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When Should You Remove a Closed Account from Your Credit Report?
Since information about a closed account in good standing can be a positive thing for both your credit reports and credit scores, you may decide it makes sense to bask in those benefits for as long as possible.
But if your closed account is littered with negative information that could make you look like a risk to lenders and potentially lower your credit scores, you may want to attempt having it removed from your credit reports. Any negative information — if you made late payments, defaulted, or the account went to collections — will stick around, and can lower your score for up to seven years.
There are a few different strategies you can try. If, for example, the closed account contains inaccurate or fraudulent information, or if the information is dated, you have a right to pursue having it removed. If you suspect that you’re a victim of identity theft, you may want to learn the differences between a credit lock vs. a credit freeze.
But if the negative information is accurate, you may have to appeal to that creditor to help you clean up your record. Or you can decide to wait it out, and the closed account will eventually come off your report.
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Steps for Removing a Closed Account from Your Credit Report
There are four basic strategies for removing a closed account from your credit report.
Dispute Errors on Your Credit Report
If you believe your credit report includes inaccurate, incomplete, or fraudulent information on an open or closed account:
Contact the Credit Bureaus
First, review the data on file with all three credit reporting agencies: Experian, Equifax, and Transunion. (Or request a tri-merge credit report that combines the data from all three.)
Then contact the credit bureaus and explain why you’re disputing the information and include supporting documents. All three bureaus have a page just for this purpose on their website. Or you can download a dispute form, fill it out, and mail it in. Either way, following the recommended format will help ensure you include all necessary data.
Contact the Company That Furnished the Information
Contact the bank, credit card company, or business that provided the disputed information to the credit bureaus. The Consumer Financial Protection Bureau (CFPB) offers instructions and a sample letter to assist with this process. If you suspect the inaccurate information could be the result of identity theft, you can find help through the Federal Trade Commission at https://www.identitytheft.gov/#/
Wait for a Fix
The credit bureaus typically have 30 calendar days (45 in some situations) to look into your dispute. Once the investigation is complete, they have five business days to let you know, and you should receive a copy of your updated credit report.
If they don’t agree the information should be removed, you can send a letter and ask that they note the dispute on future reports. You also can send a complaint to the CFPB or contact an attorney.
Write a Goodwill Letter or Pay-for-Delete Letter
Although a creditor isn’t required to remove negative information from your credit reports, you can try writing a goodwill or pay-for-delete letter asking for their help.
Not much of a writer? You can try calling instead. Either way, be prepared to plead your case clearly and respectfully.
A goodwill letter can give you an opportunity to explain to a creditor why you fell behind on your payments and why you’re hoping to get the negative information removed from future credit reports.
If you’ve been a long-standing customer (or can manage to write a heartstring-tugging letter), you may be able to convince the financial institution or business to help you turn over a new leaf.
If the closed account still has a balance, you may be able to use a pay-for-delete letter as an incentive to get it removed from your credit reports. This strategy involves offering to pay the outstanding balance in exchange for getting the account off your reports.
Wait for the Account To Come Off on Its Own
It may feel like a lifetime, but negative information can be listed for only seven years. So you may decide just to wait it out.
If the information is still on your reports after the seven-year mark, you can use the dispute process to have it removed.
Establishing Healthy Credit Habits for the Future
Watching your credit score take a dip after you close an account can be frustrating. But practicing good financial habits going forward can go a long way toward bolstering your credit scores. Here are a few steps to consider:
Make Timely Payments
Payment history makes up 35% of your FICO Score, so if you want to boost your score, it’s critical to pay your bills on time.
Keep Your Credit Utilization Low
Because credit utilization is another important factor that goes into calculating your credit score, it’s a good idea to keep credit card balances low. Don’t let a high limit on a card or line of credit tempt you into spending more than you can manage.
Let Your Credit Accounts Age Gracefully
It may be tempting to cancel a credit card you’ve finally managed to pay off. But since your credit score is partially based on the age of your accounts, it may make more sense to keep open an account that’s in good standing.
Track Your Spending
If you like the convenience of using credit and debit cards to pay for purchases, but you tend to lose sight of your spending, a money tracker app like SoFi can help you see exactly where your money is going, so you aren’t just winging it month to month.
Monitor Your Credit
If you aren’t monitoring your credit, you may not have any idea what your credit score is. By using an app like SoFi, which has free credit monitoring, you can check your score regularly. You also can request a free copy of your credit report once a year from each of the three credit bureaus via AnnualCreditReport.com.
Be Vigilant Regarding Credit Report Errors and Fraud
In order to dispute problems on your credit report, you have to know what to look for. Learning how to read your credit report can help save you from more serious financial trouble.
Familiarizing yourself with the various sections might help you spot common credit report errors and potential fraud.
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Closed accounts aren’t automatically removed from credit reports. The credit bureaus may keep information from a closed account on your reports for years: seven years for negative information, and ten years for positive info. However, you can request to have the account removed if you file a dispute and can show the information is inaccurate. Other strategies include writing a “goodwill” letter, a “pay-to-delete” letter, and contacting the creditor directly. It’ll take time, but persistence often pays off.
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Can you remove a closed account from your credit report?
Unless information about a closed account is inaccurate, it may appear on your credit report for years. But there are strategies that can help you with getting the information removed or updated.
How long does it take for a closed account to be removed from a credit report?
It can take up to seven years for negative information from a closed account to come off a credit report. And it can take up to 10 years before positive information goes away.
Will paying off a closed account help a credit score?
Your credit reports will continue to include negative information about a closed account for up to seven years. But if you follow through and pay off the debt, the change in the account’s status can be noted on your reports. And if you’ve lowered the amount of debt you’re carrying by paying off the account, it can help improve your credit score.
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