How to Remove a Closed Account From Credit Report

A closed account on a credit report signifies a credit account that is no longer active and cannot be used for new charges. While the account is closed, its history, including payment behavior, remains on the credit report and influences a credit score. Consumers seek to remove these accounts, particularly if they contain negative information, to improve their credit standing.

Understanding Closed Accounts on Credit Reports

A closed account on a credit report indicates that a credit line, such as a credit card or a loan, is no longer available for new transactions. The account can be closed by the consumer, perhaps after paying off a loan or deciding to discontinue using a credit card, or by the creditor. Creditors might close accounts for various reasons, including inactivity, a history of late payments, or a significant change in the consumer’s credit profile.

The duration a closed account remains on a credit report varies depending on its payment history. Accounts that were in good standing with on-time payments when closed can stay on a credit report for up to 10 years. These positive closed accounts contribute favorably to a credit score by demonstrating responsible credit management. Conversely, closed accounts with negative information, such as late payments, charge-offs, or accounts sent to collections, remain on a credit report for about seven years from the date of the original delinquency. Bankruptcies can remain for up to 10 years.

The presence of a closed account on a credit report is not inherently detrimental. A closed account with a positive payment history benefits a credit score by extending the length of credit history. The impact of a closed account on a credit score is influenced by factors such as payment history, the amount owed, and the overall length and mix of credit. Removing a closed account prematurely, especially one with a good history, may shorten the length of credit history reported, which might not always be advantageous.

When Removal is Possible

Removing a closed account from a credit report is possible only when the information reported is inaccurate or a result of fraudulent activity. The Fair Credit Reporting Act (FCRA) protects consumers by mandating that credit reporting agencies ensure accuracy and privacy of information in credit files. This law provides a framework for consumers to dispute incorrect information.

A primary reason for removal is errors in the account information. Errors include an incorrect account balance, an erroneous payment status, duplicate accounts, or accounts not belonging to the consumer. If the reported details do not accurately reflect the account’s history or ownership, a dispute can be initiated to correct or remove the entry.

Accounts opened due to identity theft are another scenario for removal. If an account was fraudulently opened in the consumer’s name, it can be removed from the credit report. Official documentation, such as a police report or an identity theft affidavit from the Federal Trade Commission (FTC), strengthens the case for removal.

A “goodwill removal” may be an option for minor, legitimate negative marks, such as a single late payment. This involves directly requesting the creditor to remove the negative entry. Creditors are not obligated to grant such requests, and they are more likely to consider them if the consumer has an otherwise exemplary payment history and the negative mark was an isolated incident. Legitimate, accurate negative closed accounts, such as charge-offs or collections within the allowed reporting period, cannot be removed simply because they negatively impact a credit score. These items must remain on the report for the full reporting period, seven years from the date of original delinquency, before automatic removal.

Gathering Information for a Dispute

Before initiating any formal dispute process, consumers must gather specific information and supporting documentation. The initial step involves obtaining copies of credit reports from all three major credit bureaus: Equifax, Experian, and TransUnion. Consumers are entitled to a free credit report from each bureau once every 12 months through AnnualCreditReport.com. Reviewing these reports allows for the identification of any discrepancies related to closed accounts.

Once credit reports are in hand, the consumer should pinpoint the specific closed account or accounts that contain inaccurate information. This involves noting the creditor’s name, the account number, and the nature of the error. For instance, if a payment is incorrectly reported as late, these details must be identified.

Collecting supporting documentation is an important phase, as evidence substantiates the dispute. For errors, this might include payment records, bank statements, canceled checks, or official letters from creditors confirming corrections. In cases of identity theft, a police report and an Identity Theft Report from IdentityTheft.gov are important. Providing evidence helps expedite the investigation process.

Identify which credit bureau or bureaus are reporting the inaccurate information, as disputes must be filed with each bureau individually. Knowing the original creditor or collection agency associated with the disputed account is necessary, as they are the data furnishers responsible for providing the information to the credit bureaus. This preparatory phase ensures all pertinent details are organized before proceeding with the formal dispute submission.

Submitting a Dispute

Once all necessary information and supporting documents have been gathered, the next step involves formally submitting the dispute to the relevant credit reporting agency. Each major bureau offers online portals for submitting disputes. To dispute online, a consumer navigates to the bureau’s dispute center, selects the specific account and item to dispute, and provides the reason for the inaccuracy. Prepared documents, such as payment confirmations or identity theft reports, can be uploaded directly through these portals to support the claim.

Alternatively, consumers can submit disputes by mail, which often involves sending a formal dispute letter along with copies of supporting documentation. It is advisable to send such letters via certified mail with a return receipt requested. This method provides proof that the credit bureau received the dispute. The physical package should include a letter detailing the disputed items, relevant account numbers, and an explanation of why the information is inaccurate. Copies of identification, such as a government-issued ID and a utility bill, may be required.

Upon receiving a dispute, the credit bureau is required to investigate the claim within 30 to 45 days. During this period, the bureau communicates with the data furnisher, which is the original creditor or collection agency that provided the disputed information, to verify its accuracy. If the furnisher cannot verify the information, or if it is found to be inaccurate, the credit bureau must correct or delete it from the credit report. The consumer will then receive notification of the investigation’s results. Consumers also have the option to dispute directly with the creditor or furnisher in parallel, sending a similar letter to their designated address for credit reporting disputes.

Following Up and Alternative Actions

After submitting a dispute, monitoring the outcome and taking further action if necessary are important steps. Consumers should review the results of the credit bureau’s investigation, which arrive in the form of an updated credit report or a detailed letter. If the dispute is successful and the inaccurate closed account is removed, check all three credit reports again to ensure the correction has been applied across all three bureaus.

If the dispute is denied and the information remains on the report, several alternative actions are available. Consumers have the right to add a brief statement, 100 words or less, to their credit report explaining their side of the dispute. This statement will be visible to anyone accessing their credit report. Re-disputing the item is an option if new information or additional supporting documents become available. However, credit bureaus may dismiss disputes as frivolous if they lack new information.

For unresolved issues or concerns about violations of the Fair Credit Reporting Act, consumers can file a complaint with the Consumer Financial Protection Bureau (CFPB). The CFPB is a federal agency that supervises financial institutions and handles consumer complaints, including those related to credit reporting. When filing a complaint, providing all correspondence and documentation related to the dispute strengthens the case. In instances of identity theft, if not already completed, filing an official Identity Theft Report with IdentityTheft.gov and a police report supports efforts to remove fraudulent accounts, as these documents provide legal weight to the claim.