How to Remove Closed Accounts From Your Credit Report
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Managing your credit report can be confusing. We all do our best to keep our credit in good standing by paying our bills on time and making sure to keep our credit utilization rate as low as possible. But there are so many factors that make up our credit report that it’s hard to keep track of it all sometimes. That’s why it’s important to consider your options, especially if you’re looking to improve your credit score. Here’s what you need to know about closed accounts and whether you can remove them from your credit report.
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Removing Closed Accounts From Your Credit Report
A closed account is an account that has been deactivated or terminated. This could be for a positive reason — such as paying off your student loans — or a negative reason. Accounts can be closed by you, the customer, or by the financial institution that you’ve borrowed from. When an account is closed, it means that no further credits can be added. So if you close a line of revolving credit such as a credit card, you’ll no longer be able to use the card to pay for things. Typically, for lines of revolving credit, you’ll need to let the card issuer know if you want to close your account. This is because, unlike installment loans, there is no repayment term after which the account would close naturally.
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Paid in full
Some accounts may be referred to as paid in full rather than as a closed account. Paid in full usually refers to installment accounts, such as auto loans. Since the account cannot be used for any purpose other than what the loan was issued for, when the loan is paid in full it is essentially a closed account.
How closed accounts affect your credit
Even though an account is closed, it can still make an impact on your credit score. The truth is that closed accounts can stay on your credit report for up to 10 years after it is closed or paid in full. If the account has a positive history, that can be good news because the positive information will help you maintain a strong credit history. So as long as the account didn’t have delinquent payments, you probably don’t need to worry about it being on your credit report.
Accounts that have a negative history can also stay on your credit report for up to 10 years. Late payments can remain on your credit report for 7 years, even if you only missed a payment here or there. If the financial institution reported late payments to the credit bureau, you can expect it to show up on your credit report. After 7 years, the closed account can still be on your credit report, but the late payments will no longer be there. But if your account was delinquent when it was closed, the entire account will be removed from your credit report after 7 years.
Ways to remove closed accounts from your credit report
If you’ve decided that you want to remove a closed account from your credit report, the next step is to choose how you’re going to go about it. In some cases, you may not succeed in getting the closed account removed from your credit report. Even so, it’s worth a try if you think that removing the account will have a positive impact on your credit score. There are 3 main ways you can go about trying to remove a closed account.
Dispute inaccuracies
One of the most important reasons to try to get an account removed from your credit report is if there is inaccurate information attached to it. For example, you might find an unfamiliar account on your credit report. In this case, it could be because of a simple error that the credit bureau can fix easily. Or, it could be due to identity fraud. Either way, it’s important to dispute the account in question with the credit bureaus.
Completely illegitimate accounts are an extreme example, but you should keep an eye out for minor inaccuracies as well. This might be a misspelling of your name, an incorrect address or birth date, or any other inaccurate information about yourself or the account and its payment history. These inaccuracies can also be disputed. According to the Fair Credit Reporting Act, credit reporting agencies are required to correct or delete inaccurate information that has been brought to their attention.
To dispute an inaccuracy on your credit report, you can begin the dispute process with one or more of the three major credit bureaus — Equifax, Experian, and TransUnion. All three credit bureaus allow you to start the dispute process either online or by certified mail. Disputing information on your credit report is free, but it does require some work on your part. You’ll need to provide your name, date of birth, social security number, and every address you’ve lived at in the past two years with your dispute. You’ll also need to submit a copy of your driver’s license (or another government-issued identification document) and a copy of a utility bill or insurance statement to prove your identity.
When you dispute inaccurate information, you’ll need to list the items that you are disputing and explain why you believe the information is inaccurate. However, just because you claim that something is inaccurate, it doesn’t mean that the credit bureau will take you at your word. As part of the dispute process, you’ll need to provide documentation that supports your claim that the information is inaccurate.
The dispute process explained
When you’ve gotten all of your necessary documents together, you can either upload them to the credit bureau’s website or mail them to them. You can file the same dispute with each credit bureau that has inaccurate information on your credit report. But even if the inaccuracy is only on one credit report, it may be a good idea to contact all of the credit bureaus so they’re aware of the inaccurate information.
After the credit bureau(s) receive your request, they will reach out to whoever supplied the credit bureau with the information that you are disputing. For example, if your credit card issuer reported that you missed a payment and you are disputing that, the credit bureau will reach out to your credit card issuer to begin their investigation. Then, if the credit bureau’s investigation confirms that the information is inaccurate, the information must be removed or corrected by the entity that inaccurately reported it in the first place. When this happens, that entity must also notify the other credit bureaus so they can update their reports as well.
The dispute process typically takes up to 30 days, and you’ll receive the results of the investigation once it is completed. You may also be able to check the status of your dispute online while you wait for the results. If you disagree with the results of the investigation, you can opt to re-file a dispute with new information supporting your claim. You can also add a statement of dispute to your credit report, which is a note in your report that lets creditors know that you disagree with information in the credit report. Alternatively, you can contact the lender or other entity who reported the inaccurate information to speak with them directly about correcting the information.
Write a letter to the creditor
If a closed account on your credit report is legitimate and accurate, the credit bureau is not going to be able to help you. However, you can go directly to the creditor to make your request. Most people who do this request that the account is removed because it has negative information, such as a history of late payments or an outstanding balance. Creditors are not required to remove negative items when you request it, but some creditors may be willing to do so in some cases. If the negative information that you want to get rid of occurred because of a hardship, for example, a creditor may be more inclined to help you out.
Goodwill letters
The most common type of letter that creditors receive in these cases is a goodwill letter. It’s simply a request for the creditor to remove the closed account from your credit report out of their own goodwill.
Goodwill letters should be written professionally and concisely. Basically, you’ll want to state your case. For example, if you were unable to pay off the balance of your account because you lost your job, you can explain that. It’s also a good idea to explain that this one instance is not indicative of how you normally handle your debts, or that you’ve improved how you handle your debts.
Since goodwill letters are not any sort of official process, there is no timeline for a creditor to respond to your letter. In fact, creditors are not required to respond to your letter at all, so there’s a chance you’ll never hear back regarding your request. Even so, it might be worth a shot if you want to get a closed account removed from your credit report.
Pay for delete letters
Another letter that you can try submitting to the creditor is the Pay for Delete letter. This type of letter is typically used when you have an outstanding balance on your closed account or for a charge-off account. For collection accounts that have gone to a collection agency, you’ll need to address them to the agency.
Pay for Delete letters are exactly what they sound like. It’s an offer from you to pay for the account to be removed from your credit report. Like goodwill letters, creditors don’t need to accept your request to pay for your account to be deleted from your report. In a way, a pay for delete letter is also a riskier strategy because you need to be able to follow through with the payment if your request is accepted.
Before writing a Pay for Delete letter, there are some factors to consider. For example, if this is an old account from several years ago, it may not be worth paying for it to be removed at this point. You should also determine whether the debt is still valid because it’s possible that your state’s statute of limitations on collecting the debt could have run out.
In a Pay for Delete letter, you should explicitly state what you are requesting and what you are offering. This means that you tell them exactly what you want to be removed from your credit reports, and list the credit bureaus that you’d like them to contact. You’ll also need to write out how much you are offering to pay in exchange for the information being removed from your credit report. You can also include a deadline on your letter, but keep in mind that the creditor might ignore it anyway since they aren’t required to respond to you. If the creditor does accept your offer, you need to make sure you get it in writing so you can prove that you made an agreement.
Wait
If all of the information about the closed account is accurate and the creditor isn’t willing to remove the account from your credit report, there’s only one thing left that you can do. At this point, you’ll need to wait for the information to fall off your credit report naturally. In the meantime, you can review your free credit report using services such as AnnualCreditReport.com. You can also take other steps to work on improving your credit while you wait for the closed account to be removed.
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Companies that can help remove closed accounts
If you want help navigating the process of removing closed accounts from your credit report, there may be some options available to you. It’s important to note that you don’t need to hire a company to do any of the steps involved with disputing information or asking lenders to remove a closed account from your report. However, if you’re willing to pay for a service, you might be able to let someone else handle it for you.
Credit repair companies
Credit repair companies that you can pay to work with the credit reporting agencies in an attempt to improve your credit. When you hire a credit repair company, they’ll usually start by requesting a copy of your credit report from each of the 3 major credit bureaus. Then they will review your reports and look for negative items that could be damaging your credit. Using this information, the company will make a plan for disputing inaccurate information and negotiating with creditors.
From this point, the credit repair company will handle disputes and letter-writing for you. You’ll need to supply the required documentation to help support your case, but you can leave the “heavy lifting” up to the credit repair company. The credit repair company may also suggest other ways to improve your credit, such as applying for new credit cards or other types of credit. If you feel you can responsibly manage to raise your credit limit so you have more available credit, you can follow this advice. But, it’s also important to only use the suggestions that you’re comfortable with based on your own personal finance history.
Some of the top credit repair agencies include Credit Saint, Lexington Law, Sky Blue, and The Credit People.
Costs associated with removing closed accounts from your credit report
The good news is that there really aren’t many costs associated with trying to get closed accounts removed from your credit report. You might need to spend a little bit of money to print out documents and/or mail letters, but otherwise, it’s free to dispute information on your credit report. The only major cost that you might face is a payment if your pay for delete request is approved. Debt collectors will want to make money from the transaction, so if your negative account has a large balance, you may have to pay quite a bit to get it removed from your credit report.
The ability to get a free copy of your credit report and FICO score also make it inexpensive to monitor and repair bad credit. That being said, if you decide to hire a credit repair agency, you’ll have to consider the costs that the agency charges as well.
Pros and cons of removing closed accounts
Pros
- If your closed credit account wasn’t in good standing or had a poor payment history, removing it can improve your credit report.
- Removing a closed account that reports inaccurate information may be able to help improve your credit score.
- Removing closed accounts from your credit report can allow you to focus on the accounts that still need to be paid off.
Cons
- If you remove a closed credit card account from your credit report, you will reduce the amount of credit that is available to you. This can raise your utilization rate and have a negative impact on your credit score.
- Removing an account from your credit report can affect the average length of your credit history. This can also have a negative impact on your credit score.
- It’s possible that removing a closed account can also remove positive account history, which can damage your credit score. This is especially true if you don’t have many open accounts to show a positive payment history.
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The bottom line
In short, you don’t need to remove closed accounts from your credit report. However, there are some situations in which it might benefit you to do so. It all depends on the information that’s attached to the closed account. If the closed account was an account in good standing with no negative history, it can help prove your creditworthiness when you apply for a new loan. On the other hand, if the closed account has inaccurate information or negative information, it can hurt your credit score if it stays on your credit report.
It’s important to remember that it’s not always possible to get a closed account removed from your credit report immediately. In some cases, a creditor will remove the account for you or you can correct inaccurate information. But even if your attempts to remove an account are unsuccessful, you can take comfort in the fact that they will fall off of your credit report eventually.
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Ashley Hart is a lead copywriter and digital marketing expert covering finance, law, real estate, music, entertainment, health and wellness.
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