Here’s how long closed accounts stay on your credit report


Many of us have closed a credit card account without realizing how much it impacts our credit scores. So how long do closed accounts stay on your credit report? According to consumer credit reporting agency TransUnion, a closed account – an account in good standing with a history of on-time payments – stays on your report for up to 10 years. Such an account usually helps your credit score. An account with negative information like late or missed payments can stay on your credit report for up to seven years after it is closed. This type of account closure can adversely affect your credit score.

Here, we take a look at the reasons why an account may be closed, why some account closings hurt more than others, and what you can do to strengthen your credit report.

What causes a credit card account to be closed?

There are several ways to close accounts. They understand the following.

You close the account

Here are three reasons someone might be tempted to close a credit card account.

1. You are no longer using the card

Let’s say you bought a credit card in your freshman year of college and now ditched it for a travel rewards card that helps cover the cost of an annual getaway with friends. Closing the old account you signed up for at university might make sense. After all, you never plan to use it again. Yet closing an unused credit card can have consequences.

2. Are you tired of paying the annual membership fee?

Maybe you’ve been tempted by a credit card with a fantastic signup bonus and ignored the fact that the card charges you an annual fee. Long after switching to another card that better meets your needs, you call the first card’s credit card issuer and ask them to waive the annual fee, but they deny the request. Again, you think it makes sense to cancel this card, and there are ways to close an unused credit card without harming your credit.

3. You are in debt and you fear you will never get out of it

Maybe you’ve sat down to pay bills one day and found yourself face to face with how much credit card debt you owe. You wanted nothing more than to get rid of the debt and get rid of the credit card temptation.

Your creditor closes the account

Credit card companies are notorious for closing accounts when the situation is convenient for them. A credit card is a loan, and the credit card company takes the risk. Most card companies have a limited amount they can lend, and if a consumer doesn’t do their part – either using the card often enough or paying it off – it’s up to the company to protect its bottom line.

Here are two of the main reasons a creditor can close an account.

1. Lack of use

Everything about business, from advertising to customer service, costs money. Likewise, each credit card account costs the business money. Its business model is to make money by charging interest and fees. If you don’t use the card for a while, the bank eventually realizes that it is losing money. Let’s say you’ve had a credit card for several years and only use it for as long as it takes to take advantage of the signup bonus. You may try to log into your account one day and find that it is gone. It was the credit card issuer’s way of ghosting you and moving on to another customer who could use the card and earn money for the business.

2. Misuse of the account

A credit card company can allow some mistakes. You can make a late payment and then pay less than the minimum payment a few months later. Your debt may even go to a collection account for a debt collector. At some point, the lender may say enough and close your account.

Can a creditor close an account without your knowledge?

People are often surprised to learn that creditors have no legal obligation to notify you before (or after) your account is closed. There are all kinds of consumer protection laws,

but when it comes to informing a consumer that an account has been closed, anything goes. While a credit card company can contact a customer when an account is overdue (in the hope of getting paid), they have no legal obligation to tell someone they’ve closed. the account.

This sounds odd, given that credit card issuers are legally required to notify cardholders when they make major changes to the account. But legally, closing an account is not considered a major account change.

What is the impact of a closed credit card on your credit report?

A closed account can impact your credit a little or a lot. Here’s why: Five factors go into calculating your credit score, and two of them are affected by closing a card. Let’s take a look at these two.

Length of credit history

The length of credit history refers to the length of time you use credit. It represents 15% of your FICO® score. It makes sense for creditors to care about the length of your credit, because the longer you have been dealing with credit cards, the better their idea of ​​how consistent you are. Remember the scenario where you were approved for a credit card in your freshman year of college? Canceling that old credit card harms that part of your credit score more than canceling new credit.

Credit utilization rate

Your credit utilization rate is also impacted by the cancellation of a card. Also known as “amounts owed,” credit usage refers to the amount you owe compared to the total amount of credit you have. Your credit utilization rate is 30% of your credit score, and experts also suggest that you keep your ratio below the same number, 30%, although the lower the better.

This table shows how canceling a card can impact your ratio. Let’s say you have four credit cards and cancel one. Each card has a $ 5,000 credit limit, and you have debt on two of the cards you plan to leave open.


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