What to Do With Closed Accounts on Your Credit Report

A closed account on a credit report refers to a credit line or loan that is no longer active. These accounts remain visible on your credit report for an extended period, even after being closed, because they document your past borrowing behavior and payment history. Whether an account was closed by you or the creditor, its presence continues to provide a historical record of your financial conduct to potential lenders. This ongoing visibility is a standard aspect of credit reporting, reflecting how credit bureaus compile comprehensive financial profiles.

How Closed Accounts Appear and Influence Credit Scores

The duration a closed account remains on a credit report varies depending on its payment history. Accounts closed with negative information, such as late payments or missed payments, typically stay on your credit report for seven years from the date of the original delinquency. Conversely, closed accounts that were paid as agreed, indicating a positive payment history, can remain on your credit report for up to 10 years from the date they were reported as closed by the lender. Bankruptcy filings, depending on the type, can stay on your report for seven to 10 years.

Accounts closed in good standing, especially those with a long history of on-time payments, can continue to benefit your credit score for their entire reporting period. These positive entries contribute to the length of your credit history, which is a factor in credit score calculations. However, closing an account can sometimes indirectly affect your score by altering your credit utilization ratio, which is the amount of credit you are using compared to your total available credit. If closing an account reduces your total available credit while your balances remain the same, your utilization ratio may increase, potentially lowering your score.

Negative closed accounts, such as those with a history of late payments, will continue to impact your credit score negatively for the seven years they remain on your report. The severity of this impact can diminish over time as the negative event ages. The type of credit also plays a role, as a mix of different credit types, such as revolving credit and installment loans, can positively influence credit scores. Closing a credit card might diminish this credit mix, which could affect your scores.

Reviewing Closed Account Details

Regularly examining your credit reports ensures accuracy, especially for closed accounts. Federal law provides access to free weekly credit reports from Experian, Equifax, and TransUnion via AnnualCreditReport.com. These reports can be requested online, by phone, or by mail.

When reviewing your credit reports, pay close attention to the details of any closed accounts listed. Verify the account status, such as whether it is marked as “closed,” “paid in full,” or “charged off.” Check the dates associated with the account, including the date it was opened and the date it was closed.

The reported balance, payment history, and the name of the creditor should also be carefully scrutinized for accuracy. Any discrepancies could indicate an error. It is also beneficial to check for any unrecognized accounts, which could be a sign of identity theft.

Correcting Inaccuracies on Closed Accounts

If you discover an inaccuracy on a closed account within your credit report, you have the right to dispute this information with the credit reporting companies. The dispute process can be initiated online, by mail, or over the phone with each credit bureau where the error appears (Experian, Equifax, and TransUnion). It is important to remember that you may need to file a separate dispute with each bureau that shows the incorrect information.

When filing a dispute, you should clearly explain what you believe is wrong and provide specific details, including the account number for the item in question. Supporting documentation is crucial for a successful dispute. This documentation might include payment records, bank statements, or letters from creditors that verify the correct information. Submitting copies of these documents, rather than originals, is a recommended practice, and you should retain all original records for your files.

Upon receiving your dispute, credit bureaus are generally required by the Fair Credit Reporting Act (FCRA) to investigate the claim within 30 days. The credit bureau will notify you of the investigation’s results, typically within five business days of its completion. If the information is found to be inaccurate or incomplete, the credit bureau must update or remove it from your report. If the original creditor, also known as the furnisher, provided the incorrect information, they are obligated to forward the correction to all credit reporting companies to which they reported the error.