Your credit history lasts forever, but sometimes the type of credit you have doesn’t or shouldn’t. A closed account can either be a loan you have paid off, that credit card from college you decided you no longer needed, or an account that was delinquent and therefore closed. Regardless of why they were closed, an account will stay on your credit history for seven to 10 years. You can sometimes get these removed from your account, but a few steps are involved.
Can I remove closed accounts from my credit report?
Typically, a closed account can only be removed from your credit report if it is an error. For example, suppose an account was closed because the information was listed incorrectly. In that case, you can file a dispute to have it removed. While this is technically the only way to remove a closed account, there is a chance you can negotiate with the credit bureaus to remove a closed account, but it is not guaranteed.
How closed accounts affect your credit score
Closed accounts can affect your credit score because they can increase your credit utilization. Even if an account was closed correctly, it lowers your total available credit compared to the credit used. Credit utilization accounts for 30% of your credit score, making a noticeable impact on your score. Another reason a closed account can affect your credit score is it can change your credit mix.
Let’s say you have credit cards and a loan, but your closed account is a loan. Now your credit mix changes, which then affects your credit score. Credit mix accounts for 10% of your score, so it might not make that large of a difference. Finally, a closed account can impact your credit if it is older. Length of credit history accounts for 15% of your credit. So if your closed account is one of your firsts, you could see a drop in your score.
Should you remove a closed account from your credit report?
You might not like having a closed account on your credit report and the temporary drop in your score, but trying to remove it is only sometimes necessary. You only need to consider removing a closed account if it has an adverse payment history. Otherwise, an account that is in good standing is OK to leave. It shows future lenders you can pay off a loan and make payments on time.
Ways to remove closed accounts from your credit report
Here are a few simple ways to have a closed account removed.
Review your credit report
It is vital to ensure the information on your credit report is valid, including the closed account. Get a copy of your credit report and ensure the debt is a mistake. You are entitled to one free credit report a year from each of the three credit bureaus.
Gather relevant information about the closed account
You will need to gather all the critical information about the closed account to provide to the creditor. Information such as the date the account was closed, balance at the time of closing, and date of last payment. Having the relevant information available is essential when it comes time to have a charge disputed or negotiate to remove a closed account. It helps the decision-makers determine what they can do and enables you to ensure you’ve all the essential information.
File a dispute
If the closed account, or anything on your credit report, is there in error, you can file a dispute. Disputes are filed through the appropriate credit bureau that has the error on your account. Contact said credit bureau and complete the proper dispute form.
All three credit bureaus — TransUnion, Experian, and Equifax — offer online, phone, and by-mail dispute filing, making it easy for you to complete. If the error is on all three reports, you must file a dispute with each one. The forms are very similar. Keep a record of all information you’ve sent and anyone you speak to with dates for your records.
Negotiate with the credit bureau
If the closed account is accurate, though it is not guaranteed, you can request to have it removed from your report. You can send a letter, typically called a goodwill letter, requesting that the closed account be removed from your report. While this is not a guaranteed method, as creditors are not obligated to remove accurate marks from your credit report, it is worth a shot. There’s a chance you will have someone hear you out and get the marking removed.
Wait until the information falls off your credit report
A closed account does not stay on your account forever. While it might feel like forever, a closed account remains on your credit for up to seven years if it is a negative mark. You can still work on improving your credit during that time by managing other debts effectively, such as paying them on time and keeping utilization low. As time passes, the impact of the closed account lessens until it eventually falls off.
How to negotiate with credit bureaus
Negotiating with credit bureaus might sound like an enormous task. Here are a few ways to start.
Pay-for-delete is a standard negotiation tool in the credit world. If you use this method, you will write a letter to the creditor that owns that charged-off account and ask them to remove the derogatory mark on your credit in exchange for payment. This method tends to be helpful with smaller debts, but it doesn’t hurt to try, no matter the amount or situation. First, determine whether it’s best to pay the total amount or a portion in the letter to the creditor; remember to only ask for what you can handle so you don’t fall back on your terms.
Consider a credit counseling agency
Credit counseling agencies can be an excellent option for negotiating with credit bureaus. While they are not doing anything you can do yourself, hiring an agency gives you the free time to focus on other things. At the same time, a credit counseling agency will take the proper steps to make sure your negotiations are accepted. Some companies claim to be credit counseling agencies but are really out to get your personal information. Research the company before you use it to make sure it is legitimate.
Get everything in writing
Throughout the entire negotiation process, get everything in writing. Once you and the creditor agree to terms, get those terms in writing. You want documentation of how much you are expected to pay and that they have decided to remove the closed account from your credit report. If a deal is made, it must be put in writing to ensure it will be upheld.
Closed but not forgotten
Your credit history plays a massive part in your credit score, but eventually, most accounts end. When an account closes, it impacts your credit score, positively or negatively. You can work to remove this mark. Removing a closed account from your credit report could require some negotiation and does not guarantee its removal, but it’s worth a try. Worst case, wait seven years, and the derogatory mark will be removed.
Should I pay off closed accounts on my credit report?
If you can pay off the closed account, yes. While paying off the closed account does not immediately boost your score, it does help.
How many points does your credit score go down when an account is closed?
The number of points your score goes down can vary, but you can expect anywhere between 10 and 50 points.
How far back do lenders look at late payments?
Lenders can go at least 12 months back but up to 24 months when reviewing late payments.