How to take closed accounts off credit report

Understanding how closed accounts affect your credit score can seem a bit contradictory, at times, to what you might think. For instance, paying off an auto or home loan is considered a good thing, financially. But it can result in a temporary dip in your score because it reduces the variety of credit types in your mix. Lenders usually prefer borrowers who have learned to handle a good mix of loans and credit lines. 

If you don’t use a credit card, it may seem logical to close the account. But closing a credit card would lower your overall credit limit, which can raise your credit utilization and that, in turn, would negatively affect your credit score. Experts recommend keeping credit utilization under 30% but people with the very highest credit scores generally keep it under 10%. 

Closed accounts with remaining balances – like a canceled credit card account with an outstanding balance – can also affect your score negatively. If the account defaulted, it could be transferred to a collection agency. Paying off closed accounts like these should improve your credit score, but you might not see an increase right away.

Many people close credit accounts they no longer want, thinking that doing so removes the account from their credit report. The Fair Credit Report Act—the law that guides credit reporting—allows credit bureaus to include all accurate and timely information on your credit report. Information can only be removed from your credit report if it's inaccurate or outdated, or the creditor agrees to remove it.

What Happens When You Close an Account?

When you close an account, it's no longer available for new transactions, but you're still required to pay off any balance outstanding by paying at least the minimum owed each month by the due date.

After the account is closed, the account status on your credit report gets updated to show that the account has been closed. For accounts closed with a balance, the creditor continues to update account details with the credit bureaus each month. Your credit report will show the most recently reported balance, your last payment, and your monthly payment history.

Removing Closed Accounts From Your Credit Report

In some cases, a closed account can be harmful to your credit score, especially if the account was closed with a delinquency, like a late payment or, worse, a charge-off.

Note

Payment history is 35% of your credit score, and any late payments can cause your credit score to drop, even if the payments were late after the account was closed.

Removing the account from your credit score could potentially lead to a credit score increase.

Removing a closed account from your credit report isn't always easy, and is only possible in certain situations.

If the account on your credit report is actually open but incorrectly reported as closed, you can use the credit report dispute process to have it listed as an open account. Providing proof of your account status will help your position.

Having a credit account reported as closed (when it's actually open) could be hurting your credit score, especially if the credit card has a balance. You can dispute any other inaccurate information regarding the closed account, like payments that were reported as late that were actually paid on time.

Goodwill Letter

You can use a goodwill letter to request that a creditor remove a closed, paid account from your credit report.

Creditors don't have to give in to a goodwill request, no matter how nicely you ask, but you may get lucky and find one who's sympathetic to your request.

Pay for Delete

For accounts with balances, the "pay-for-delete" strategy can help you remove a closed account from your credit report. The pay-for-delete letter offers full payment of the outstanding amount in exchange for removing the account from your credit report.

Again, creditors don't have to comply. Occasionally, some creditors and debt collectors will agree to the arrangement with payment as an incentive to remove the account from your credit report.

Note

You can send your goodwill or pay-for-delete letter directly to the creditor by mail. In some cases, you can try contacting the creditor by phone first to make your request.

Wait for Accounts to Drop Off

If you choose not to take steps to remove closed accounts, you'll be happy to hear that these closed accounts won't stay on your credit report forever. Depending on the age and status of the account, it may be nearing the credit-reporting time limit for when it will drop off your credit report for good. If that's the case, all you might have to do is wait a few months for the account to fall off your credit report, and then for your credit report to update.

Note

Most negative information can only be listed on your credit report for seven years from the first date of delinquency.

If the closed account includes negative information that's older than seven years, you can use the credit report dispute process to remove the account from your credit report.

No law requires credit bureaus to remove a closed account that's accurately reported and verifiable and doesn't contain any old, negative information. Instead, the account will likely remain on your credit report for ten years or whatever time period the credit bureau has set for reporting closed accounts. Don't worry—these types of accounts typically don't hurt your credit score as long as they have a zero balance.

Frequently Asked Questions (FAQs)

What is a pay-for-delete letter?

A pay-for-delete letter is what you use to offer to settle a balance on a negative account in exchange for the debt being deleted from your credit report. The creditor or debt collector is not obligated to agree to your request, but it may be worth sending it. If you're sending the request to a collection agency, you'll need to offer enough for it to be profitable for them to settle. There's no way to know how much that is, though. If you're close to the seven-year mark for the item to fall off your credit report, it may not be worth sending a pay-for-delete letter.

How do you dispute an item on your credit report?

To dispute an item on your credit report, you'll need to contact each credit bureau and file a dispute. You can file your dispute online, which is typically the fastest option. If you have supporting documentation, you can upload that as well. You can also make a dispute by mail; be sure to use certified mail if you do.

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Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. Federal Trade Commission. "A Summary of Your Rights Under the Fair Credit Reporting Act," Page 2.

2. Consumer Financial Protection Bureau. "How Long Does Negative Information Remain on My Credit Report?"

   Should I pay off closed accounts on credit report?

   If the account defaulted, it could be transferred to a collection agency. Paying off closed accounts like these should improve your credit score, but you might not see an increase right away.

   How long does it take for closed accounts to drop off your credit report?

   An account that was in good standing with a history of on-time payments when you closed it will stay on your credit report for up to 10 years. This generally helps your credit score. Accounts with adverse information may stay on your credit report for up to seven years.

   Can closed accounts hurt your credit?

   While closing an account may seem like a good idea, it could negatively affect your credit score. You can limit the damage of a closed account by paying off the balance. This can help even if you have to do so over time. Any account in good standing is better than one which isn't.

   Does removing a closed account remove late payments from credit report?

   If you have paid off and closed the account, the late payment will be removed from your credit report seven years after it was first reported, but the account itself will remain 10 years from the closed date.