Remove Closed Accounts From Your Credit Report

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If you have recently finished paying off a debt – especially a large one, like a student loan, car payment, or mortgage – seeing that account officially closed on your credit report can make you feel fantastic. However, even closed accounts affect your credit score. Multiple late payments on the account, or any account closed without being paid in full, will lower your credit score and could negatively affect your borrowing power in the future. 

If you have closed accounts negatively affecting your credit score, you may have considered having those accounts removed from your report. Unfortunately, this is not an easy process, and you can hurt your credit score even further if certain accounts are removed prematurely. Before attempting to remove any closed accounts on your report, you need to understand why closed accounts remain on your report, consider the effect that removing the account will have on your credit, the likelihood that your creditors will agree to remove the credit, and whether the possibility of removing the closed account is worth the time and effort spent in the attempt. 

Closed Accounts Can Stay on Your Credit Report For Years

Accounts are closed after they have been paid in full, settled for a smaller sum than owed, or turned over to collections for delinquency (usually after four missed payments). A positive account is closed after being paid in full (with no history of delinquency) and can stay on a report for up to ten years after closure. Negative accounts include delinquent accounts, settled accounts, and accounts paid in full but have a history of late payments. These can stay on your account up to seven years after the original delinquency date.

How Removing a Closed Account Can Affect Credit Reports

When you close a positive account, your credit score does drop slightly, but usually by no more than a few points, and it generally recovers quickly. On the other hand, the longer a positive account was open without late payments, the better your history looks on a credit report. Therefore, removing positive accounts is inadvisable. Once the account is removed, the creditors can no longer see it, and future creditors will see you as a financial risk because you don’t have a “long” history. Even though closing a positive account can hurt your score a little by changing your debt-to-credit ratio, positive accounts are usually far more beneficial on your report than off of it.

If you have bad credit due to identity theft, incorrect information, or duplicated information, removing those accounts will improve your credit score. Keep in mind that it may be easier to contest this type of information before the account becomes delinquent than after. Keeping track of your credit score is crucial so you can catch these accounts before your credit suffers too much.

When Should You Ask for an Account to be Removed

If the negative information is correct, there is very little you can do. Credit reporting companies are required by law to report accurate information. In these situations, the best thing to do is usually to wait until the account drops off of your history at the end of seven years. In fact, your account may be closer to dropping off than you realize. If your account was declared delinquent five years ago, then you only have two years to wait before the account is dropped from your report. 

Some accounts are negative due to inaccurate information or identity fraud. Those accounts need to be dealt with as soon as you are aware of the incorrect or fraudulent information.  Contact your creditors and the credit bureaus which reported the information to advise them of the circumstances and request that the account be removed. If you can prove that the information is wrong or that someone is fraudulently opening accounts in your name, there is a good chance the account will be removed.

Closed accounts – positive or negative – will eventually disappear from your credit history. As long as there are no recurring issues, your credit score will improve as the negative accounts drop off. However, negative information resulting from an error or identity fraud needs to be removed as soon as possible. This is why monitoring your credit score is vital to your financial health. In addition to free online credit report services that you can check regularly, you are also allowed to request one copy of your credit report every year from each of the three major credit bureaus. Use these tools to make certain that your credit information is correct. For closed accounts with inaccurate information, you may want to consider consulting a credit repair service for assistance in having the account(s) removed. 

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