Key takeaways
- Closed accounts on your credit report are not necessarily a bad thing. A closed account with a positive history of on-time payments may actually help your credit score.
- If a closed account is negatively impacting your credit score because of inaccurate information, you can dispute the information with the credit bureaus.
- For closed accounts with accurate information negatively affecting your score, you can make a goodwill request to your creditor.
Your credit report is a record of the way you use credit. Do you make payments on time? Do you avoid maxing out your credit lines? How long is your track record of using credit? All of that information is on your credit report.
Although many consumers expect to see information about active accounts on their credit reports, you may be surprised that closed accounts can remain on your credit reports for years.
Even if closed credit accounts are on your report, it might not be a bad thing. Closed accounts can sometimes be removed from your credit report. Even better, you might not need to worry about having closed accounts on your credit report, particularly if those accounts were in good standing when closed.
How closed accounts affect your credit score
To understand which closed accounts to remove from your credit report, it’s helpful to know what impacts your credit score. For instance, your FICO credit score — the most common model used by creditors — is determined by five factors:
- Your payment history. This makes up 35% of your score.
- Your credit utilization ratio. This is how much debt you carry compared to how much revolving credit (like credit cards) you have access to, and it accounts for 30% of your score.
- The average length of your credit history. This accounts for 15% of your score.
- Credit age. This accounts for 10% of your score.
- Your credit mix. Your credit mix is how much debt you carry in different categories like mortgage loans and credit cards. This accounts for 10% of your score.
The three credit bureaus, Equifax, TransUnion and Experian, compile this information to determine your credit score. Closed accounts that remain on your report can still impact your credit score based on the five FICO factors.
If your closed account shows a history of on-time payments, it may continue to give your credit score a little boost for up to 10 years after the account was closed.
If your closed account shows late payments, missed payments or balances going to debt collections (even if this information is reported inaccurately), it can negatively impact your credit score for up to seven years.
When to remove a closed account from your credit report
Removing a positive account could hurt your credit scores by shrinking your credit mix or lowering your total available credit.
Consequently, you should only try to remove a closed account from your credit report if it’s negatively impacting your report. If the closed account shows only positives, there’s no reason to try to remove it from your credit report.
How to deal with negative closed accounts
If a closed account negatively impacts your credit score, you have a few options for removing this old debt from your credit report.
Option 1: Formally dispute inaccuracies on your credit report
You might be shocked to learn how common it is for credit reports to contain inaccurate information. A 2021 Consumer Reports study found that more than a third of volunteers noted errors in their credit reports. This inaccurate information can negatively impact your credit through no fault of your own.
To dispute errors on your credit report, including inaccuracies about closed accounts, you need to contact the credit bureau(s) reporting the error and ask them to correct the record. In addition to your contact information, you’ll want to include the following in your dispute:
- The account number for the account in question
- 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
Credit reporting agencies are legally required to investigate your claim, usually within 30 days, and notify you of their response.
According to the Consumer Financial Protection Bureau (CFPB), you should also contact the creditor who reported the information. For example, if your Experian credit report shows a late credit card payment, you should contact both Experian and the credit card company to make sure everyone’s records are correct going forward.
Even if your dispute is granted, the closed account might not be removed entirely from your report. However, correcting the inaccurate information may switch the closed account from a negative to a positive in your credit report.
This process is not limited to closed accounts. You can dispute any incorrect information you find on your credit report.
Option 2: Ask the creditor for a “goodwill” removal
If the information on your closed account is correct, but you still want a closed account removed from your credit reports, you can write the creditor a “goodwill letter” asking them to remove it from your credit report. This type of formal request could potentially result in having a closed account removed, but there are no guarantees.
If you’re pursuing a goodwill removal, contacting the credit bureaus is unnecessary. They will not remove accurate information at your request. However, if your creditor responds positively to your goodwill request, your creditor can ask the credit bureaus to remove the information they had placed on your credit report.
Again, this method is not limited to closed accounts. If you have an active account with a negative mark, you might contact the creditor and ask if they’re willing to remove the negative as an act of goodwill. The worst they can do is say no.
Option 3: Wait for the information to disappear on its own
Closed accounts on your report will eventually disappear on their own. Negative information on your reports is removed after seven years, while accounts closed in good standing will disappear from your report after 10 years.
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, you can get a free copy of each of your credit reports annually, thanks to The Fair Credit Reporting Act.
When to consider credit repair services
If you’re feeling overwhelmed by the idea of filing disputes with the credit bureaus or writing goodwill letters to creditors, you can consider hiring a credit repair company to handle it.
Credit repair companies file credit report disputes on your behalf. Many offer additional services, such as credit score monitoring, ID theft insurance and writing goodwill letters. It’s important to understand that credit repair companies can’t change your credit score more than you can. They won’t dispute accurate information with the credit bureaus, and they don’t have any “insider” method for improving your score. However, if you simply don’t have the time or desire to handle this on your own, they can help.
Unfortunately, with so many Americans struggling with credit score issues, credit repair scammers have emerged to take advantage of people needing help. If you decide to hire assistance, choose your credit repair company carefully.
The bottom line
Having a closed account on your credit report isn’t necessarily a bad thing. If the account shows on-time payments and was in good standing when it was closed, it could help your credit score. In that case, you can just let it sit until it falls off your report.
You have options if you are concerned about an old account negatively impacting your credit score. If the information on the account is inaccurate, you can file a dispute with the credit bureau(s) reporting the error. Even if this doesn’t purge the account from your record, removing the negative information can help your score. If the information is accurate, you can request a goodwill account removal from the creditor that extended the loan.
Good credit is built slowly over the years, and you’ll have the best results if you focus on areas where you can have a significant impact. Old accounts on your report may be inconsequential, but how you treat your credit now can impact your score for years.
Frequently asked questions
Not necessarily. Closing an account could harm your credit score in two ways. First, it reduces the average length of your credit history. Secondly, it can change your credit utilization ratio. For example, if you close a credit card with a $10,000 limit, your available credit is reduced by $10,000, and any debt you carry is now a larger percentage of your available credit. However, you may want to close accounts if you get a new credit card.
Unless you remove them early through a dispute or successful goodwill request, closed accounts can stay on your reports for 7–10 years.
Removing negative marks from your credit report through a dispute or goodwill request can give your credit score a quick boost. However, it’s important to focus on the long term when building a good credit score. Make your payments on time and keep your debt below 30% of your available credit limit to improve and maintain your credit score.
