Although it is commonly believed that the credit report lists all your accounts, their balances, and payment statuses, you might be surprised to find that even the closed accounts can linger on the credit report for several years. Surprisingly, the accounts closed in a proper standing will stay on the credit report for ten years. But any negative information about the reports such as late payments can linger for 7 years. Even the collection accounts remain on the credit report for seven years. Let’s understand how closed accounts impact your credit score.
Effect of closed accounts on your credit score
The FICO credit score is decided by several factors such as your payment history, the debt you owe, and the average credit history length. There are other factors affecting the credit score as well such as credit mix and new credit. The credit bureaus compile all this info within the credit report. It is used to decide where the credit score lies. However, there are a couple of areas where the closed accounts can impact the credit score and they are the amounts you owe and the length of your credit history. Let’s take a look at how.
Some closed accounts can raise your credit utilization rates: If you close one of your credit card accounts, you will be reducing the amount of credit available. This will increase the credit utilization rate and can harm the credit score. Keep in mind that installment loans such as personal loans do not impact credit utilization. Therefore, closed personal loan accounts do not impact the rate of credit utilization.
Account closure means a decrease in the average length of credit history: Length of credit history is partially decided by the average age of all the accounts together. So, removing an account will decrease the average length of the credit history. It is going to affect the credit score negatively.
When to remove a closed account from the credit report?
Is it possible to remove the closed accounts from the credit report? For the most part, it is a good idea to remove closed accounts from the credit report when some negative info is reported. It is true especially when the negative details are incorrect. Luckily there are some alternatives available when you are looking to get certain info removed from the credit score or you are trying to get this info removed. Here is how.
1. Dispute the inaccuracies formally: According to CFPB it is possible to dispute the inaccurate info on the credit reports. You need to do it with the credit bureau and the company that provided the info.
2. Just politely ask for the info to be removed: When you do not have any incorrect info to dispute and yet you wish to remove a closed account, you can send a goodwill letter to the credit bureaus.
3. Wait for the negative info to disappear: Keep in mind that the closed account info on the credit report will eventually disappear. This negative info is removed after every seven years. The info about the closed account in good stead gets removed after ten years. In case you have tried to dispute the negative info without any success, sometimes you may have to wait till the issue corrects itself.
Do not bother sweating the small stuff as far as credit score is concerned
Keep in mind that the credit bureaus take into consideration your overall situation while deciding the credit score. They will not just take into consideration the closed accounts on your report. There are other more significant factors in regards to the FICO credit score such as your payment history and the debt you owe. So, you need to concentrate more on the effort to pay the bills on time and keep low credit utilization. Another way of improving the credit score is by not opening or closing too many accounts.
Good credit does not happen overnight. It is built slowly over the years and you can get the best results by concentrating on areas where you can deliver more impact. If you live in Pinellas County, FL area and are looking for professional help with credit score repair, connect with Super Credit Repair. Remember, older accounts on the credit report might be inconsequential however, how you take care of the credit will have an effect on your credit score for many years.
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