How To Remove Closed Accounts From Your Credit Report
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Summary:
You may be able to get a closed account removed from your credit report, but that doesn’t mean you should. In general, if closed accounts contribute to your positive credit history, leave them be. If the closed accounts add negative information to your credit reports, you can try to have them removed. But be aware that creditors may not be willing to remove them.
Your credit scores and credit history are extremely important factors in your financial health. If you want to finance pretty much anything, such as a car, a house, or new furniture, you’ll need to have a pretty good credit history. If you don’t, you could find it hard to get approved for a loan or credit card. But we all make mistakes in life, and sometimes that results in a report entry showing we’ve mismanaged a credit account.
Such an account, even if you had it years ago, can still leave a negative mark on your credit score, marring your credit report for years to come. Read on to learn how you may be able to remove closed accounts, when you should try, and when you’re better off letting a closed account stay on your credit report.
How to remove closed accounts from your credit report
If you want to remove a closed account from your credit report, you basically have four options.
- Dispute inaccurate information (including fraudulent activity)
- Write a goodwill letter requesting the removal of negative information
- Send a “pay for removal” request letter
- Wait for the negative information to fall off your credit reports
Dispute inaccurate information
If you look at your credit report and find that there is inaccurate and damaging information reported on closed accounts, the best thing you can do for your credit score is to dispute the negative information with each credit bureau. Not all creditors report to every credit bureau, so you’ll need to check your report from each. Here are some common inaccuracies you might find.
- Identity errors: An account with a similar name that’s not yours or one showing a different name altogether.
- Balance errors: You may have paid off a credit card account or your car loan, for example, but your credit report is showing it still has a balance.
- Account errors: You may be reported as having a late payment or missed payment that was wrongly reported.
- Duplication of debt listings: Sometimes, a debt is erroneously listed twice on a credit report.
If you find an error on your credit report, you’ll want to dispute the incorrect information with each credit bureau reporting it. You’ll need to make your case in writing, either online or by mail. You can start by going to the credit bureaus’ websites to see what they recommend. They will likely advise you to begin the process using an online form.
How to dispute inaccuracies
At a minimum, you should provide the following information when you’re disputing inaccurate information with a credit bureau.
- Your complete contact information, including name, mailing address, email address, and phone number.
- The account number of the credit account in question.
- An explanation of the incorrect information and why you’re disputing it.
- Include any supporting documentation of the error, such as a bank statement or canceled check.
Once you’ve submitted your dispute, you should get confirmation that your claim was received and that the problem is being investigated. Within a month or so, you should be notified of the results of the investigation. Ideally, the negative item will be removed.
You may also want to contact the lender or creditor who reported the information. That could help speed up the process to resolve the issue.
Write a goodwill letter to creditors
In some cases, you can send a “goodwill letter” where you politely ask a creditor to remove a closed account because of a negative mark. For example, if you had a few missed payments on your closed credit card account or loan because of serious illness or injury, you may be able to explain the hardship to your creditor and have it removed. If this was your first missed payment ever, there’s a better chance the creditor will consider your request.
Keep in mind that creditors have no obligation to remove the negative reporting. However, if you’ve had a longstanding relationship with them and explain your situation, they may honor your goodwill request. Click here to learn more about getting missed payments removed from your credit report.
Pay for removal letter
Sometimes you might have a closed account that still has a balance on it. This often happens with collection accounts: after closing the accounts, creditors send them to debt collectors. If you notice that you have a closed account like this and you have money to pay it, you can send what’s known as a “pay for delete” letter. This is essentially asking a debt collector or creditor to remove a closed account with negative information in exchange for partial or full repayment of the debt. Again, like a goodwill request, the collection agency or financial institution you appeal to is under no obligation to honor your request, but it doesn’t hurt to ask.
Pro tip
If a creditor does agree to remove a closed account for payment, be sure to get the agreement in writing before making any payments.
On the subject of collection accounts, here’s another good reason to get them removed if you can: they can affect your ability to rent an apartment. Click here to find out how.
Wait until the closed account eventually falls off
The obvious downside of a closed account with negative information is that it hurts your credit score for, usually, up to seven years. On the other hand, that closed account will eventually fall off your credit report. The negative impact will then diminish, and your credit score will increase.
“An account will fall off a credit report seven years after it has become derogatory/negative. Positive/closed accounts will fall off a credit report 10 years after closing the account with no new activity. That means if your account is closed, but you have a balance that you are slowly paying off, your account remains active,” explains David Chami, Managing Partner and Attorney at Consumer Attorneys.Click to Tweet
“The seven-year rule referenced above,” Chami adds, “is controlled by the Fair Credit Reporting Act, whereas the ten-year rule is not written into law but has been adopted by the credit reporting industry.”
This may be small comfort if you’re trying to remove a negative account from your credit report with no success, but the account will go away eventually. In the meantime, focus on keeping your current accounts in good standing with no late payments and low credit utilization — don’t max out your cards. Review some helpful guidelines on how often to use your credit card.
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How closed accounts affect your credit report
It’s important to know that a closed account with a positive influence on your credit report should be left alone, advises Chami.
“There is no benefit to having positive, closed accounts removed from your credit report if those accounts have a zero-dollar balance,” he says.
Furthermore, a closed account with a flawless payment history, or one that increases the average age of your credit, actually has a positive effect on your credit history. You do not want to remove a closed account when doing so will lower the average age of your credit history or reduce the length of your positive payment history.
In addition, a closed account that adds to your credit mix, for example, can also improve your credit history. Lenders like to see you can budget for all types of debt, including revolving accounts, like credit cards, and installment loans, like personal loans or mortgages.
When it comes to your credit report, diversity is definitely a strength, as Chami explains.
“Credit diversity is 10% of your score. Having different types of credit accounts with different payment terms shows prospective creditors that you are capable of managing your debt. Car loans, mortgages, credit cards and student loans are all examples of different types of credit that would make up a diverse credit report.” — David Chami, Consumer AttorneysClick to Tweet
When should you remove a closed account?
Generally speaking, it only makes sense to remove a closed account if it’s having a negative affect on your credit score. Having said that however, unless there was a mistake regarding a closed account or you have a sympathetic creditor, chances are you may just have to wait until the negative closed account falls off your report.
As mentioned, positive closed accounts almost always help your score (and they never hurt it), so there’s really no point in having those accounts removed from your credit history.
Pro tip: — “Keep your credit accounts open. Sometimes, people switch cards, get new ones to take advantage of some offer, and then cancel older accounts. This is a mistake because the length of time you keep an account, the more valuable it will be in credit score calculations. If you don't want to use an account, keep it in a safe place, but it may be wise to hold off on closing the actual account,” says Freddie Huynh, Vice President, Data Optimization, at Freedom Debt Relief.Click to Tweet
Let’s lock in what we’ve learned with a reference table.
Decision matrix: should it stay or should it go?
| Try to remove it if data is: | Let it stay if account shows: |
|---|---|
| Fraudulent | Good Payment History |
| Inaccurate | Good Credit Mix |
| Negative | Overall Improves Credit History |
How to maintain positive credit habits going forward
Building a good credit score and maintaining it isn’t rocket science, but it does require a fair amount of discipline, organization, and vigilance. But if you follow a few simple steps, your credit score and credit history will continue to improve.
Always pay your bills on time
Your payment history makes up more than a third of your credit score, so making a habit of timely payments is always going to help your credit scores. And the reverse, obviously, is also true. If you have a negative payment history, your credit score will suffer as a result. Creditors will report any missed or even late payments to the credit reporting agencies, which will drag down your credit scores.
Pro tip: consider credit counseling
If you’re struggling to pay your bills or making late payments, don’t wait until you’re in deep trouble and your credit score suffers excessively. Consider talking to a credit counseling agency. This can help you get your finances in order, create a budget, and set up a debt management plan that is realistic for you.
Try to keep your credit utilization rate low
Your credit utilization ratio is another important part of your credit score (30% of your FICO score, for example). It refers to how much of your credit you’re using in relation to your total available credit. Most credit experts say you should keep your credit utilization below 30% to maintain a good credit score. Less than 10% is even better.
For example, if you have $10,000 in available credit and your balances total $2,000, your credit utilization ratio is 20%. This is pretty good. By contrast, if your credit balances equal $5,000, you have a 50% credit utilization rate. This is not so good, and it can cause your credit score to drop. As well, a new credit card issuer or other lender might consider the 50% ratio a red flag.
“Use the credit card, but not too much. In other words, keep your utilization low. That's the percent of your available credit you actually use. There's no magic number, but it's best to keep it as low as you can,” — Freddie Huynh, Freedom Debt ReliefClick to Tweet
Only apply for credit if you need it
Whenever you apply for a new loan or credit card account, it results in a hard inquiry on your credit report. Each hard inquiry causes your credit score to drop a few points. The inquiry will usually stay on your report for two years.
This isn’t a big deal if you don’t do it very often, but the more you apply for credit, the more hard inquiries appear on your credit report, and this lowers your score. Not only does this have a negative effect on your credit score, it can also raise red flags for a lender or credit card issuer who, as a result, may not see you as a good risk.
Check your credit reports regularly
All of your credit history, both positive and negative, is reported to the three credit bureaus — Experian, TransUnion, and Equifax — and sometimes mistakes happen. For that reason, it’s always a good idea to routinely check your credit reports for any inaccuracies or fraudulent activity.
According to the Federal Trade Commission (FTC), consumers are entitled to (at least) one free credit report per year (source). And it’s your responsibility to keep an eye on your credit reports so you can make sure the credit bureaus report each credit account or loan you have accurately. It also gives you a chance to see if there are any fraudulent accounts or mistakenly reported accounts in your name so you can dispute the information.
Another solid idea is to sign up with a credit monitoring service that can alert you to new data reported on your credit history. These services also keep you apprised of changes to your credit score and the reasons for the changes. This way you can see how and why your credit scores change and adjust your actions accordingly.
Note: During the pandemic, credit bureaus offered expanded access to your credit reports, allowing even weekly free credit reports. You may find that this expanded access is still in effect to some extent, but it’s unclear how long that will last. Take advantage of it if and while you can.
Key takeaways
- You can remove a closed account from your credit report by disputing inaccuracies, requesting that the creditor remove it, or waiting until it eventually falls off your credit report after seven to 10 years.
- You shouldn’t remove closed accounts from your credit report if they enhance positive credit, such as by extending your good payment history or adding to your credit mix.
- If it’s possible to remove a negative closed account from your credit, you should try because it hurts your credit score for up to seven years.
- If closed accounts are hurting your credit, or you’re struggling to pay your debts, consider consulting a credit counseling or credit repair service.
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