How to remove a closed account from your credit report


You might think that closing a credit card or other account might automatically remove it from your credit report. But while closing an account stops you from using it, it doesn’t mean it disappears from your credit history.

Credit reports include information for open and closed accounts. As long as they remain on your credit report, closed accounts can continue to impact your credit score.

If you would like to remove a closed account from your credit file, you can contact the credit bureaus to delete inaccurate information, ask the creditor to delete it or simply wait.

How Closed Accounts Affect Your Credit

Credit scores are based on several factors: your payment history, the amount of available credit you use, the age of your credit accounts, the types of credit you use, and how often you apply for new credit. . The impact a closed account has on your credit largely depends on the type of account involved and whether you still owe a balance.

[Read: Balance Transfer Credit Cards.]

With a credit card, “closing an account causes you to lose the available balance on that card,” says Rod Griffin, director of public education at Experian. “This results in an increase in your Use rateor equilibrium/limit ratio.”

This could hurt your credit score, since a higher utilization rate against your credit limit is a sign of risk, Griffin says.

Installment loans are a little different because they aren’t revolving accounts like credit cards and don’t affect your credit utilization rate. Once a loan is paid off in full and the account is closed, you lose the benefit of continuing to make regular, on-time payments that positively impact your credit score, but the payment history remains.

Whether it’s a loan or a credit card, a closed account can still affect your score. According to Equifax, closed accounts with derogatory marks such as late or missed payments, collections and imputations will stay on your credit report for about seven years.

Accounts closed with a “paid as agreed” status, on the other hand, can remain on your credit report for up to 10 years from the date the lender marked it as closed.

When should you remove a closed account from your credit report?

There are different situations in which it makes sense to remove a closed account from your credit. What you need to weigh in the balance are the potential credit score implications.

“If the account contains negative or derogatory information, the closed account is likely damaging to your credit, and deleting it will likely increase your credit score,” says David Chami, managing partner of Price Law Group, a debt relief agency. debt. “If the account is one with a positive history, deleting it probably isn’t in your best interest.”

Josh Rubin, owner and CEO of marketing firm Post Modern Marketing in Sacramento, Calif., has seen first-hand how deleting closed accounts can impact credit. In August 2018, he paid off his remaining $15,000 in student debt in full. When he checked his credit in September, his score had dropped from 700 to 640.

After repaying the loan, his agent not only closed his account, but also deleted the entire payment history from his credit file. The repairer was within his rights, as creditors are not required by law to report borrower account information to credit bureaus. But it was Rubin who paid the price.

[Read: Best Starter Credit Cards.]

“I thought it wouldn’t be bad since I’m less in debt now and it should technically be less risky,” he says. “Apparently that’s now how the rating agencies see it; they see that I now have a shorter track record and only a few lines of credit, so I’m riskier for them.”

In Rubin’s case, he didn’t ask for the closed loan account to be removed from his credit, but his situation illustrates why removing accounts from your report is something to approach with caution. The loss of the positive payment history associated with this account has significantly hurt its score. Rubin says he is now in the process of asking the repairman to restore his payment history in hopes that his credit rating will recover.

If you have a closed account with a positive history, you might be better off leaving it alone rather than trying to have it deleted. On the other hand, you may be hoping that removing a negative closed account from your report will increase your score. In this case, you need to know what your options are.

Remove a closed account from your credit file

You can follow a few steps to remove closed accounts from your credit report. If one doesn’t work, move on to the next.

— Challenge inaccuracies.

— Write a goodwill letter.

— Wait.

The first step: Dispute inaccuracies.

“The Fair Credit Reporting Act only requires credit reporting agencies to correct or remove inaccurate information,” Chami says. And even then, it doesn’t happen automatically. You must first successfully challenge the information in question to have it removed or updated.

The three credit bureaus — Equifax, Experian and TransUnion — allow consumers to engage in litigation online or by registered mail. When initiating a dispute, you will need to provide certain information to the credit bureau, including:

— Your name

— Account number

— Nature of the information you dispute

— Supporting documents to show why the dispute is valid

From there, the credit bureau must investigate your complaint with the creditor or lender in question, usually within 30 days, and notify you in writing of its findings. If the disputed information is inaccurate, the law must delete or correct it. Once an error is removed from your credit report, the credit bureau cannot add it back unless the lender or creditor proves it was accurate.

This process may support negative information related to errors, but it may not entirely remove a closed account from your credit file. And if you’re looking for deletion based only on negative activity, it might be a dead end if the information is accurate. There are, however, other avenues you can follow to have a closed account deleted.

Step Two: Write a goodwill letter.

A goodwill letter is basically a polite way to ask a creditor or lender to remove the history of a closed account from your credit file. This is not the same as litigation, since you are likely asking for negative information to be removed without challenging its accuracy. And the creditor has no legal obligation to delete accurate information.

Writing a goodwill letter can be more effective when there are extenuating circumstances – for example, if you haven’t paid off a credit card or loan because serious illness or injury prevented you from paying it. to work for an extended period. In addition to considering forces beyond your control, creditors can also weigh your payment history and determine if you have attempted to pay in good faith since your default.

Some collection agents will review payment requests for deletion of the collection account when consumers make full payment or settle for less than the full amount. But pay-for-delete agreements are problematic because debt collectors aren’t required to delete the account even if you pay them to do so, and even if the debt collection account is deleted, the original account with a derogatory history will stay.

For example, if you stopped paying a credit card bill for a year and the issuer sent your account to a debt collector, you could pay the debt collector to delete the account. Even if he follows through on the deal, only the debt collector’s account would disappear. The original sender account would remain and continue to reflect your year of missed payments.

Third step: wait.

If the negative information you want removed is accurate and the creditor does not want it removed, you may have no options. But closed accounts don’t last forever.

Depending on your patience, you can simply wait for a closed account to fall on your credit report. In the case of negative account information, it is important to understand the timing.

“Any negative information in the payment history will be deleted seven years from the date the debt originated,” Griffin said.

[Read: Credit Cards for Bad Credit.]

Essentially, the clock starts ticking on negative items when they are first reported on your credit, not when the account has been closed. Depending on how old the account is, it might be about to be removed from your report anyway, in which case you can just bide your time. Reviewing your credit report can give you an idea of ​​when closed accounts can be removed.

“We recommend that consumers check their credit reports several times a year to check for accuracy and potential identity theft and fraud,” Griffin says.

You can get your report from each of the three credit bureaus for free once a year via AnnualCreditReport.com. Signing up for free credit monitoring services can help you track credit accounts and your credit score from month to month.

Adopt good credit habits in the future

If you’ve closed a credit account due to late payments or non-payment, deleting it from your credit report is a step in the right direction. From there, you can focus on practicing credit habits designed to promote a positive score, including:

Pay bills on time each month

— Keep credit card and other revolving debt balances low

– Repay debt balances

— Keep unused credit accounts open

— Limit how often you request new lines of credit

One final tip: if you’re having trouble keeping up with credit card or loan payments, don’t leave creditors in the dark. Contact them at the first sign of trouble to see if they offer hardship payment plans or deferrals so you can avoid negative information on your credit report.

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