Credit scores can have a big impact on your ability to obtain a mortgage or loan, as well as affect the rate you end up being charged if you’re approved. Because of this impact, as a smart consumer, you need to pay attention to what’s on your credit report and make sure it’s accurate.
One thing you may wonder is why closed accounts are still on your credit report and how they may be affecting your credit score. Should you try to have them removed?
Why Closed Accounts are on Your Credit Report
Your credit report reflects how responsible you have been in the past in paying creditors. When you apply for a new loan, the lender will review how many accounts you have open and how well you’ve handled loans in the past. This includes accounts that have been closed or paid in full.
Paid accounts that were in good standing can remain on your credit report for ten years from the date they were closed, providing proof to future creditors that you paid them as agreed. Late payments and other forms of negative information usually fall off the report after seven years, which is three years sooner than accounts in good standing.
How are Closed Accounts Affecting Your Credit Score?
Credit scores are determined by a combination of factors. There are a couple of ways that closed accounts may affect your score, which include:
- Credit utilization rate
- Length of credit history
You might think that closing a credit card account that you aren’t using would look good on your credit report, but it can actually have a negative effect on your score. Closing an unused credit card can reduce your total available credit, which raises your credit utilization rate.
Your credit score is also affected by how long each of your credit accounts has been open. Closing an existing account can decrease the average age of your total credit accounts.
When Should You Try to Remove a Closed Account?
If a former creditor is reporting inaccurate information on a closed account, it makes sense to try to have it removed. You have the right to dispute inaccurate information with a former creditor as well as with the credit bureau that’s reporting it. Incorrect information on your credit report can usually be disputed online by providing account numbers for the accounts that are wrong and a written explanation on why you believe it’s incorrect. Credit reporting agencies are required to investigate credit disputes within 30 days of a written dispute.
If you’d like to see an account removed that has negative information that’s accurate, you can write to your creditor using a polite and friendly tone with information on why payments were late. This is known as a “goodwill letter.” However, it’s important to note that they may or may not agree to remove the account from your credit report.
If you feel like you could use help with this process, Dovly can take care of credit disputes for you. It’s an affordable and efficient solution for repairing your credit.