It’s a commonly taught tenet of credit: Closing an account could wind up hurting your score. And closing credit cards can be particularly problematic — primarily because doing so can skew your credit utilization rate (how much debt you’re carrying versus your total available credit limits) and possibly affect the age of your credit report.
Of course, for folks with a lot of debt or a propensity to overspend, the decision to close an account can be a no-brainer.
And, even outside of money woes, there may be times when you just want go ahead and get rid of a line of credit. (See: credit cards with an annual fee that’s no longer worth paying.)
But will a closed account continue to affect your credit score? One commenter recently expressed some concern over the subject at hand:
I have an old Best Buy acct on my file. It is closed [and] I was late 3 times many years ago. Is it a closed acct used to calculate the age when determining my score? If, not I want to request the account to be removed. It was closed Aug 01, 2008. I am afraid if I request it to be removed my score will go down. But I thought the credit company is supposed to remove old accounts 7 to 10 years after. Please advise. Thanks.
Here’s the deal: Closing a credit card account can wind up affecting your credit utilization rate (and, therefore, your credit score) right away, as that credit line is essentially no longer at your disposal. But the account doesn’t just disappear entirely from your credit report.
When Do Closed Accounts Age Off?
Accounts closed in good standing — meaning, for example, you didn’t miss any payments on them — remain on your credit report for 10 years from the date of closure. A closed account with a negative payment history, on the other hand, gets deleted 7 years from the original delinquency date of the account.
“So, the positive information is kept longer than the negative information,” Rod Griffin, Experian’s director of public education, explained in an email.
And, so long as the closed accounts appears on your credit report, it can influence your credit score in some way. For instance, the account will still be factored into the age of your credit report (also known as the length of your credit history.) And any negative information, like a few missed payments, could lower your score a bit — though, the good news here is, the impact will lessen as you get further and further away from the delinquency. (You can go here to learn more about how long specific items stay on your credit report.)
Removal by Request?
Now, you generally can’t have a legitimate account removed from your credit report outside of these windows by request. “It will be removed automatically when the timeframes described above are reached,” Griffin said.
But, in our reader’s specific case, the account may already have been deleted. “It was closed eight years ago, meaning it was delinquent prior to that date,” Griffin said.
In this case, it’s a good idea for them to pull their credit reports to see if the account is still on their credit file (you can do this for free each year at AnnualCreditReport.com). If it is, they can dispute its appearance with the credit bureau in question. (You can go here to learn how to dispute errors on your credit report.)
Remember, if an old account is mussing up your credit, you may be able to raise your score by paying down any high credit card balances, asking for a credit limit increase or consolidating revolving credit with a personal loan. And you can build good credit in the long-term by making all payments on time, keeping debt levels low and adding a mix of new credit accounts only as your score and wallet can handle them. (You can track your progress by viewing two of your credit scores for free each month on Credit.com.)
More on Credit Reports & Credit Scores:
- The Credit.com Credit Reports Learning Center
- What’s a Bad Credit Score?
- How Credit Impacts Your Day-to-Day Life
Image: Jacob Ammentorp Lund