How Long Do Closed Accounts Stay on Your Credit Report?

A closed account refers to any credit account, such as a credit card or a loan, that is no longer active for new transactions, regardless of whether it was closed by the consumer or the lending institution. Credit reports serve as a comprehensive historical record of an individual’s borrowing and repayment activities. Understanding how long these accounts remain on a report is important for managing one’s financial standing.

Standard Reporting Durations

The duration a closed account remains on a credit report largely depends on its payment history. Accounts closed in good standing, meaning those with consistent on-time payments, can stay on a credit report for an extended period. These positive accounts often remain for up to 10 years from the date of closure or last activity, contributing to a longer credit history.

Conversely, closed accounts with negative information, such as late payments or defaults, remain on a credit report for a shorter, but still significant, timeframe. Most derogatory marks are reported for up to seven years. The clock for these negative items begins from the date of the original delinquency, not the date the account was officially closed.

Specific Account Types and Their Reporting Periods

Different types of negative closed accounts have specific reporting durations. Late payments are reported for seven years from the date of the missed payment. Charge-offs and collection accounts remain on a credit report for seven years plus 180 days from the date of original delinquency.

Foreclosures stay on a credit report for seven years from the date of the first missed payment that led to the foreclosure action. Bankruptcies have varying timelines: a Chapter 7 bankruptcy can remain for up to 10 years from the filing date, while a Chapter 13 bankruptcy stays for up to seven years. Major credit bureaus stopped including tax liens on credit reports in 2018. Judgments can remain for seven years from the filing date.

Impact on Credit Scores

Closed accounts, whether positive or negative, influence credit scores throughout their reporting period. Positive closed accounts, especially those with a long history of timely payments, continue to benefit a credit score. They contribute to the length of credit history and demonstrate a responsible payment pattern. Closing an account with a strong positive history might slightly reduce the average age of accounts, but the positive payment history remains valuable.

Negative closed accounts, such as charge-offs or collection statuses, continue to impact a score for their entire reporting duration. While their presence is detrimental, their impact lessens over time as they age. Credit scoring models consider various elements, including payment history, amounts owed, the length of credit history, and the mix of credit types.

Account Removal and Its Effects

Once an account reaches the end of its legally mandated reporting period, credit bureaus are required to remove the information from the credit report. This removal is an automatic process and does not require consumer intervention. The Fair Credit Reporting Act (FCRA) sets these time limits to ensure that negative information does not remain on a report indefinitely.

The removal of negative accounts, such as collections or bankruptcies, often leads to an improvement in a credit score. Conversely, the removal of positive accounts, particularly older ones, might have a slight effect if they were heavily contributing to the length of credit history or credit mix. The primary benefit of account removal is the disappearance of derogatory information, allowing for a clearer financial picture over time.