How Long Do Closed Accounts Stay On Your Credit Report (And Why)?

Exact Answer: 7 – 10 Years

A credit report, also sometimes called a credit file or credit history can be defined as a summary statement mentioning a detailed breakdown of one’s credit transactions. It is prepared by a recognized credit bureau. It gives thorough information about how the person to whom the report belongs has handled all his credit accounts.

Such a report serves as a good reference for potential lenders and creditors to decide whether to give additional credit or not. It also includes information about types of accounts handled, payment records, and all other relevant information that might help in determining one’s creditworthiness.

Thus, the credit report plays an essential role in helping creditors and lenders in their decision-making process regarding whether to lend money or not, also if lending money, what terms and conditions would be the most suitable as per one’s credit payment track record.

How Long Do Closed Accounts Stay On Your Credit Report

How Long Do Closed Accounts Stay On Your Credit Report?

ConditionsDuration
Closed account for which payment was made on time10 years
Closed accounts for which payment was made late7 years

Credit reports need to be regularly checked to ensure that all the information present on them is accurate and complete. It should not depict any false information. A credit report also gives information about the types of accounts a particular person has. It typically shows closed, settled, written-off, and other accounts of the credit report holder.

Closed accounts are nothing but paid-off accounts of a person which might stay on that person’s credit report for several years. It is kept remained on one’s credit report to evince how the person has repaid his earlier loans and credits lent to him.

These closed accounts can help the potential lenders to decide whether or not to lend money. The closed accounts typically stay on one’s credit report for a period which is about 7 to 10 years. The duration for which the closed accounts might be visible on the report also depends on how one had handled their loan and credit payments.

Credit reports list out both positive as well as negative information about the person to whom the credit reports belong. Thus, it would list closed accounts even if they are timely paid or paid late. Thus, if one had maintained a good standing by paying all their due on time, the information about closed accounts would depict good payment history.

Generally, for people who do not default in payment and pay their due on time, the duration for closed accounts to last on credit reports is about 10 years. However, for people having a history of late payments and defaults, closed accounts might stay for about 7 years in credit reports.

Why Do Closed Accounts Stay For So Long In Your Credit Report?

The payment history of a person who had availed of credit says a lot about a person. It is considered to be the most influential factor that affects a person’s credit scores. A credit score is a measure that indicates a person’s ability to repay the borrowed money.

When a person has paid as per agreement i.e on time consistently, the closed accounts on credit reports symbolize that one is capable of repaying future credits and loans too on time.

However, if one had made a late payment or had defaulted previously in repaying credit, it could come as a derogatory mark in one’s credit report and thus, stay only for 7 years, less than the time it would have lasted if the account was in good standing.

Thus, if one has paid their due on time and has a positive track record of making payments, one should not try to remove it as this information will help the person in maintaining their good credit scores which might be beneficial for the person in the future.

Credit reports that show closed accounts also indicate beside the account how it was closed. There can be two possibilities, first, the accounts can be closed by the account holder due to poor services, etc or the account might be closed by the lender due to inactivity, late payment, default, etc.

It is always advisable for one to make all their payment on time to ensure that only positive information is reflected in their credit report. This will in turn help the person in building a long and stable credit history.

Conclusion

A credit report is nothing but a detailed summary giving information about a person’s payment track records and other credit-related information. It also gives information about the person’s closed accounts that can stay in the report for a duration of about 7 to 10 years.

Accounts with negative information like late payment are removed from the credit report after 7 years from the original delinquency date. On the other hand, positive closed accounts that did not face any default can stay on credit reports for about 10 years.

References

  1. https://www.toomuchdebt.com/wp-content/uploads/ToGetAndKeepGoodCreditScore.pdf
  2. https://search.proquest.com/openview/0edf13237a6c19d453e7fd3dac05c67d/1?pq-origsite=gscholar&cbl=43721
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