How long does a closed account affect your credit score

Many people make the mistake of thinking that closing a credit card will remove it from their credit report. Only, it doesn't. Your credit report provides a complete picture of your credit history and that means reporting both open and closed accounts that are accurate and timely. There may be some good news if you’re hoping for a closed account to eventually disappear from your credit report.

What Happens When You Close a Credit Card

When you close a credit card, it doesn’t fall off your credit report right away because it's still within the credit reporting time limit.

If you're still making monthly payments on a credit card balance, your payment history will continue to be updated each month. Once you've completely paid off the balance, the credit card issuer will eventually stop sending monthly updates for that account since it becomes inactive.

Paying at least the minimum on time is important even after you've closed your account. Any payments late by 30 days or more will be updated on your credit report and included in your credit score. These late payments can stay on your credit report for up to seven years. You'll also be charged a late fee.

The account status for a closed credit card will be reported as closed, even when you're still making payments on the balance. The status may indicate that the account was closed by you, the cardholder, or the credit card issuer, depending on which of you closed the account. If your account was closed with a delinquency, like a 90-day late notice or a charge-off, that will show on your credit report, too.

A closed account will have the same impact ​on your credit, regardless of who closed the account.

Once the account is paid off, it still doesn’t fall off your credit report. Instead, your credit report will be updated to show a zero balance for the account.

How Long a Closed Account Stays on Your Credit Report

The length of time a closed credit card stays on your credit report depends on whether the account was closed in good standing. A negative closed account, like a charged-off credit card, will remain on your credit report for seven years. That's the maximum amount of time most negative information can be included on your credit report.

If your account was closed in good standing, there is no law requiring it to be removed from your credit report in a certain time period. It could stay on your credit report indefinitely, but will likely be removed ten years after it was closed based on the credit bureau's guidelines for reporting closed accounts.

It's not a bad thing that a closed account still remains on your credit report, depending on how the balance and status of the account. Closed accounts generally only hurt your credit score when you have a negative account status or a high credit card balance. An account closed in good standing, however, may have a positive impact on your credit score for as long as the account is included on your credit report.

You might want to scrub your credit report of all closed accounts, but you can only have inaccurate or outdated information removed from your credit report. If this is true for any of your closed accounts, submit a dispute with the credit bureaus to have the account removed from your credit report.

1. Credit Intel
2. Credit Score
3. How Long Does a Closed Account Stay on a Credit Report?

Closed accounts remain visible on your credit report for seven to 10 years, depending on whether they were in poor or good standing when closed.

By Karen Lynch | American Express Credit Intel Freelance Contributor

5 Min Read | January 29, 2021 in Credit Score

At-A-Glance

When you close a credit card account or a loan, it’ll continue to show up on your credit report for years.

A closed account can have positive and negative impacts on your credit score – even if it was closed under the best of circumstances.

Why Do Closed Accounts Stay on Your Credit Report So Long?

Credit card companies and other lenders are interested in your closed accounts as part of your credit history. In the typical course of business, lenders supply information on your spending and payments to credit reporting agencies, which summarize it all into credit reports that are used to calculate your credit score. Then, lenders refer back to these reports and scores to assess the risk of approving your application for a new credit card, or other type of loan, and to set the interest rate in line with that risk. 

Information from closed accounts may help lenders get deeper insight into a person’s past debt management. 

What Does a Closed Account Mean on Your Credit Report?

A closed account on your credit report shouldn’t worry you if the account was well-managed and in good standing at the time it was closed. Having it remain there as a positive reflection on your credit history and a track record of on-time payments generally helps your credit score. It stays on your credit report for up to 10 years. 

However, any negative information about a closed account on your credit report could lower your score. This can be the case if you made late payments on the account, for instance, or it was referred to a debt collector. Under federal regulation, this negative type of information generally stays on your credit report for seven years.1

‘Side Effects’ of Closing Your Account

Even if you’re closing an account that’s in good standing, though, it can temporarily increase your credit utilization rate, as described above, which counts for 30% of your credit score. There are two other possible side effects of closing an account:

• Length of credit history: If you’re closing one of your oldest cards, you could lose several years from your history as an active and responsible borrower. The age of your credit history accounts for 15% of your FICO credit score.
• Mix of credit types: Lenders prefer borrowers with a mix of revolving credit, such as credit cards, and installment credit, such as personal loans. Closing one type might affect your mix of credit, which determines 10% of a FICO score. 

The good news in most of these situations is that your score should rebound in a few months as long as your payments continue on time.2

Can You Remove a Closed Account from Your Credit Report?

It’s not easy to get a closed account off your credit report, unless the information is inaccurate. According to the National Consumer Law Center, one error that comes up from time to time is a change in the actual age of a debt that has gone to a collection agency, or multiple reports of the same debt going to collection.3 If you find information on your report that you believe is inaccurate, you can send a letter to both your lender and to the credit reporting agency – the Consumer Financial Protection Bureau provides sample letters to help.4 For more, see “Removing Closed Accounts from Your Credit Report.” 

If your account was closed due to unusual personal circumstances and you’ve paid all your bills in full and on time since then, you might ask your lender to remove a closed account from your record as a gesture of goodwill. But the lender is under no obligation to do so.

How to Close a Credit Card Account or Loan

Sometimes, it just makes sense to close an account, even if you face a temporary dip in your credit score. Maybe closing the account will help you control spending, for example, or maybe the card or loan in question is costing you fees or interest that you’d rather not pay. Credit reporting agencies suggest taking a thoughtful approach to closing accounts. For instance, if you’re about to seek a mortgage for a new home, you might not want to close any accounts just beforehand. Canceling multiple accounts should be done in a gradual, planned fashion to avoid sending negative signals to potential lenders. 

To close a credit card account, you’ll want to pay off your account balance, redeem or transfer any rewards, and contact your card issuer’s customer service department to request account closure – either by phone or in writing – rather than simply cutting your card in half. Usually, you should receive a confirmation letter in about 10 days.5 To close a loan account, all you have to do is pay off the loan in full. Your lender will generally contact you via mail or email to confirm the loan has been paid off.

The Takeaway

Because closed accounts remain on your credit report for so long, that seemingly minor detail can take on greater significance if it’s not approached thoughtfully. Credit reports and credit scores don’t only play a big role in your ability to borrow money affordably. Insurance companies, landlords, and even potential employers often consult them, as well.

Karen Lynch is a journalist who has covered global business, technology, finance, and related public policy issues for more than 30 years.

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

The material made available for you on this website, Credit Intel, is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.