How Long Do Closed Accounts Stay on Your Credit Report?

Credit reports document an individual’s financial behavior, serving as a comprehensive record for lenders and other entities to assess creditworthiness. They track accounts, payment histories, and inquiries, showing how an individual manages financial obligations. Understanding how long information, especially for closed accounts, remains on a credit report is important for informed personal finance decisions.

General Credit Reporting Timelines

The Fair Credit Reporting Act (FCRA) regulates how long information stays on a credit report. Most negative information, like late payments, collection accounts, and charge-offs, is limited to seven years. This seven-year period begins from the “date of first delinquency,” which is when the account first became significantly past due and was not brought current.

Bankruptcies have different reporting timelines. A Chapter 7 bankruptcy remains on a credit report for up to 10 years from the filing date. A Chapter 13 bankruptcy, which involves a repayment plan, stays on the report for seven years from the filing date. Positive information, such as accounts paid as agreed, can remain on the report for up to 10 years, providing a continuous positive payment history.

Closed Account Removal Timelines

Closed accounts have distinct removal timelines based on their standing. Accounts closed in good standing, meaning they were paid on time and had a zero balance, remain on the credit report for up to 10 years from the closure date. These positive accounts continue to contribute to a consumer’s credit history.

Closed accounts with negative marks, such as late payments, charge-offs, or those sent to collections, are subject to the seven-year reporting limit. The reporting period for these accounts starts from the date of the first delinquency that led to the negative status, not the date the account was closed or paid off. Paying off a collection account updates its status to “paid” but does not restart or shorten the seven-year reporting period from the original delinquency date.

Accounts closed due to a bankruptcy filing align with the bankruptcy’s removal timeline. If an account was discharged in a Chapter 7 bankruptcy, it is removed from the credit report when the bankruptcy falls off after 10 years. For accounts included in a Chapter 13 bankruptcy, they are removed after seven years, consistent with the Chapter 13 reporting period.

Impact of Closed Accounts on Credit Scores

Closed accounts can influence a credit score, positively and negatively, while on the credit report. A closed account consistently paid on time and in full benefits a credit score by contributing to a longer payment history and overall length of credit history. These accounts demonstrate responsible borrowing, a factor in credit scoring models.

When a positive closed account drops off the credit report, it might slightly reduce the average age of accounts, but this impact is not significant if other positive, active accounts exist. The removal of negative closed accounts can lead to a noticeable improvement in a credit score. Once derogatory information, such as late payments or collection accounts, ages off the report after its seven-year reporting period, it no longer weighs down the score.

Closing a revolving account, like a credit card, can also indirectly affect a credit score through credit utilization. Credit utilization is the ratio of outstanding balances to total available credit. If closing an account reduces total available credit while balances on other cards remain the same, it can increase this ratio, potentially lowering the credit score. Keeping credit utilization below 30% is generally recommended for a healthy credit profile.