While it’s commonly accepted that your credit report lists the various accounts you have, their balances, and the status of their payments, you may be surprised to find that closed accounts can linger on your report for a while. years. Interestingly, closed accounts in good standing can stay on your credit reports for 10 years, while negative information on your reports like late payments can stay on your accounts for 7 years. Collection accounts can also stay on your credit report for 7 years.
The good news is that there is not much to worry about when it comes to closed accounts in good standing. Additionally, consumers can benefit from understanding the real impact of closed accounts on your score and the relevance of removing them from their credit reports.
How closed accounts affect your credit
Your FICO credit score is determined by a wide range of factors including your payment history (35%), the amount of debt you owe (30%), the average length of your credit history (15%), new credit (10%) and your credit mix (10%). Credit bureaus compile this information on your credit reports, which they use to determine where your score is.
The two main areas where closed accounts can affect your credit score are the length of your credit history and the amounts you owe. Here’s how:
- Certain closed accounts can increase your credit utilization rate. When you specifically close a credit card account, you reduce the amount of open credit you have. This can cause your credit utilization rate to increase, which could negatively impact your credit score. Note, however, that installment loans like personal loans do not affect your credit usage. For this reason, a closed personal loan account would not affect your credit utilization rate.
- Closing an account can reduce the average length of your credit history. The length of your credit history is in part determined by the average age of all your credit accounts combined. Therefore, closing an account (and especially an older account) can reduce the average length of your credit history, and thus negatively impact your credit score.
Keep in mind that these are two categories where your credit score is could be affected by a closed account, but that doesn’t mean it will. If you closed a good credit card account 8 years ago and it still shows up on your credit report, for example, a specific account is unlikely to have a big impact.
When should you remove a closed account from your credit report?
You may be wondering “Can I get closed accounts removed from my credit report?” “
In most cases, it only makes sense to attempt to remove a closed account from your credit report if negative information has been reported. This is especially true if the reported negative details are incorrect.
Fortunately, you have some options to have the information removed from your credit reports, or at least trying to get deleted information. Here’s how to remove closed accounts from your credit report.
Step 1: Formally dispute the inaccuracies
According to the Consumer Financial Protection Bureau (CFPB), you can dispute inaccurate information on your credit reports, and you should do so with the credit bureaus as well as with the company that provided the information. If you have negative reports of a closed account on your Experian credit report, for example, you will dispute the information with Experian and with the creditor who reported the false information, such as a credit card issuer.
You can dispute inaccurate information online by providing your name, address and phone number, along with the details of your dispute. Details you will want to list along with the contact information include:
- Account numbers of the accounts you dispute
- A written explanation of the incorrect information and why it is incorrect
- A copy of your credit report with incorrect information highlighted
- All documents proving the validity of your dispute, such as payment receipts
Once you have gathered this information, you will send it to the credit bureau that reports the bogus information and to the company that reported it. From there, credit bureaus are legally obligated to investigate your complaint, usually within 30 days, and notify you of their response.
Although a closed account cannot be fully removed from your credit reports if your dispute is accepted, credit bureaus may remove incorrectly reported negative information. This can help improve your credit score even if you are still stuck with the account on your report. (See also: Error on your credit report? Here’s how to dispute it)
Step 2: politely request deletion of information
If you don’t necessarily have incorrect information to dispute but still want a closed account removed from your credit reports, you can also write credit agencies a “goodwill letter”. This type of formal request could result in the deletion of an account for goodwill, but there is no guarantee.
Either way, you can ask and all they can say is “no”. You can find out how to contact the three credit bureaus using the links below:
Step 3: Wait for the information to disappear on its own
Also, keep in mind that closed accounts on your report will eventually go away on their own. Negative information on your reports is deleted after 7 years, while closed accounts in good standing will disappear from your report after 10 years. If you tried to dispute incorrect negative information without success, or if your goodwill request went unanswered, you may just have to wait for your problem to be corrected.
If you’re curious about which accounts are still on your reports or just want to monitor your report information over time, note that you can get a free copy of your credit reports from all three credit bureaus through the AnnualCreditReport.com website. Where previously you could only get a free report from each office on this site once a year, you can now access a free report every week until April 2021.
When it comes to your credit score, don’t worry about the little things
Remember that credit bureaus consider your entire situation when determining your score, not just which old accounts are still listed in your reports.
Additionally, the most important factors in your FICO score are your payment history and how much debt you have. For this reason, you should focus most of your efforts on making sure your bills are paid on time and maintaining a credit utilization rate that is on the lower end of the spectrum, and preferably less than 30%. Other ways to improve your credit score are to refrain from opening or closing too many accounts and having a few different types of accounts on your reports at any given time.
Good credit is built slowly over the years, and you will achieve the best results if you focus on areas where you can have a significant impact. The old accounts on your report may not matter, but how you treat your credit now can impact your score for years to come.