Can a Closed Account Still Report Late Payments?
Understand how closed accounts impact your credit report. Learn if past late payments persist and discover strategies for managing your credit history.
A late payment occurs when a borrower fails to make a payment by the due date. Payments a few days past due may incur a late fee but are generally not reported to credit bureaus unless 30 days or more overdue. Credit reports summarize an individual’s credit activities, detailing payment history and account statuses. These reports are used to calculate credit scores, which lenders use to assess creditworthiness and loan repayment likelihood.
How Account Closures Affect Credit Reporting
Closing a credit account does not erase previously reported late payments or other negative information from your credit report. Once an account is genuinely closed, with no further payments due, new “late payments” on that specific closed account cannot be reported.
However, if a balance remains unpaid on a closed account, subsequent negative events related to that debt can still be reported. This includes actions such as charge-offs or collections, which indicate that the original creditor has deemed the debt uncollectible or has sold it to a debt collector. A charge-off typically occurs when payments have been missed for 120 to 180 days, and it signifies the creditor writing off the debt as a loss, though the borrower remains legally obligated to pay it. These negative marks appear on your credit report and can significantly impact your credit standing.
Understanding Credit Report Impact and Timelines
Most negative information, including late payments, charge-offs, and collection accounts, typically remains on a credit report for up to seven years from the date of the original delinquency. This seven-year period begins from the first missed payment that led to the derogatory mark. Even if a charged-off debt or collection account is paid, the negative entry can still remain on the credit report for the full seven years, although its impact on credit scores may lessen over time.
Derogatory marks, like late payments, can significantly lower credit scores. A single late payment may drop a score by a substantial number of points. The severity of the impact depends on factors like how late the payment was (e.g., 30, 60, or 90 days), the number of delinquencies, and the individual’s credit history. While these negative marks remain visible, their negative influence on credit scores generally diminishes as they age, especially if no new negative information is added.
Steps for Addressing Reported Late Payments
If you discover a late payment or other inaccurate information on your credit report, especially concerning a closed account, you have the right to dispute it. The Fair Credit Reporting Act (FCRA) empowers consumers to dispute inaccuracies with the three major credit bureaus: Experian, Equifax, and TransUnion. Obtain a copy of your credit report from each bureau to identify all errors, as information may vary.
The dispute process involves clearly identifying the inaccurate item, explaining why it is incorrect, and providing supporting documentation. Disputes can typically be filed online, by phone, or by mail; sending a written dispute via certified mail with a return receipt requested provides a valuable paper trail. The credit bureau is generally required to investigate the dispute within 30 days and will contact the company that provided the information. If the information is found to be inaccurate or cannot be verified, it must be corrected or removed from your credit report.