While it’s commonly understood that your credit report will list the various accounts you have, their balances and payment status, you may be surprised to find that closed accounts can linger on your report for years. Interestingly, accounts closed in good standing can stay on your credit reports for 10 years, whereas 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 there’s not a lot to worry about when it comes to closed accounts in good standing. Further, consumers can benefit from understanding how closed accounts really impact your score, and whether it makes sense to have them removed from their credit reports at all.
How closed accounts affect your credit
Your FICO credit score is determined by a wide range of factors including your payment history (35%), how much 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 falls.
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 close a credit card account specifically, you are reducing the amount of open credit available to you. This can cause your credit utilization rate to increase, which could have a negative impact on your credit score. Note, however, that installment loans like personal loans do not affect your credit utilization. For this reason, a closed personal loan account would not affect your credit utilization rate.
- Closing an account can decrease the average length of your credit history. The length of your credit history is partially determined by the average age of all your credit accounts combined. As a result, closing an account (and especially an older account) can reduce the average length of your credit history, and thus impact your credit score in a negative way.
Keep in mind that these are two categories where your credit score could be affected by a closed account, but that doesn’t mean it will. If you closed a credit card account in good standing 8 years ago and that account is still listed on your credit report, for example, it’s unlikely that specific account is making much of an impact at all.
When should you remove a closed account from your credit report?
You may be wondering, “Can I have closed accounts removed from my credit report?”
For the most part, it only makes sense to try to remove a closed account from your credit report if some negative information has been reported. This is especially true if the negative details reported are incorrect.
Fortunately, you do have some options when it comes to having information from your credit reports removed, or at least trying to get information removed. Here’s how to remove closed accounts on your credit report.
Step 1: Formally dispute 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 the company that provided the information. If you have negative reporting on a closed account on your Experian credit report, for example, you would 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, your address and your phone number and the details of your dispute. Details you’ll want to list along with contact information includes:
- Account numbers for accounts you’re disputing
- A written explanation of the incorrect information and why it’s wrong
- A copy of your credit report with the incorrect information highlighted
- Any documents that prove your dispute is valid, such as receipts of payment
Once you gather this information, you would send it to the credit bureau that is reporting the false information as well as the company that reported it. From there, credit reporting agencies are legally required to investigate your claim, usually within 30 days, and notify you of their response.
While a closed account may not be removed from your credit reports entirely if your dispute is granted, the 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 ask for the information to be removed
If you don’t necessarily have any incorrect information to dispute but you still want a closed account removed from your credit reports, you can also write the credit bureaus a “goodwill letter.” This type of formal request could lead to having an account removed out of goodwill, yet there are no guarantees.
Either way, you can ask and all they can say is “no.” You can find out how to contact all three credit bureaus using the links below:
- Equifax: Equifax.com/personal/credit-report-services
- Experian: Experian.com/help
- Transunion: TransUnion.com/credit-help
Step 3: Wait for the information to disappear on its own
Also, remember that closed accounts on your report will eventually disappear on their own. Negative information on your reports is removed after 7 years, whereas accounts closed in good standing will disappear from your report after 10 years. If you have tried to dispute incorrect negative information without success, or if your goodwill request went unanswered, it’s possible that you’ll just have to wait it out until your problem corrects itself.
If you’re curious about which accounts are still on your reports or you simply want to monitor the information on your reports over time, note that you can get a free copy of your credit reports from all three credit bureaus via the website AnnualCreditReport.com. Where you could previously only get a free report from each bureau on this site once per year, you can now access a free report every week through April 2021.
When it comes to your credit score, don’t sweat the small stuff
Remember that credit bureaus consider the entirety of your situation when determining your score, and not just which old accounts are still listed on your reports.
Further, the most important factors of your FICO score are your payment history and how much debt you owe. For that reason, you should focus most of your efforts on making sure your bills are paid on time and maintaining a credit utilization rate that’s on the lower end of the spectrum, and preferably under 30%. Other ways to improve your credit score include refraining from opening or closing too many accounts and having a few different types of accounts on your reports on any given time.
Good credit is built slowly over the years, and you’ll have the best results if you focus on areas where you can have significant impact. Old accounts on your report may be inconsequential, but how you treat your credit now can impact your score for years to come.