When you close a credit card account, you might think that it no longer has any bearing on your credit report. Some borrowers intentionally close accounts in an effort to get rid of them. But it’s just one of many common credit myths. In actuality, closed accounts don’t magically vanish. Your closed accounts will fall off your report according to a predetermined schedule.
DurationYour credit report is meant to reflect your ability to handle credit. Just because you close an account doesn’t mean your credit usage related to that account goes away. How you handled old accounts is one of many aspects that determine your credit score and risk level. Because this insight is highly valued, closed accounts appear on your Experian credit report for seven years from the date it closed if it was closed with no delinquency or derogatory action.
Beneficial EffectsIf you have an account that you’ve paid in full and on time, it can have a positive effect on your credit score even after you’ve closed it, although you’d generally benefit more by having it remain open, even if you don’t use it.
Part of your credit score is composed of the total number of accounts that you have, including your closed accounts. If your closed accounts were never delinquent, they can help prop up the long-term payment history of your score.
You’ll also get credit for the age of your accounts, which remain part of your score as long as they appear on your report, even if closed.
Delinquent AccountsSince delinquent accounts make a big impact on your credit score, it would be nice if you could just close them and have them disappear as you apply for new credit. Unfortunately, this isn’t the case. According to Experian, some types of delinquent accounts, such as unpaid tax liens, can stay on your report for as long as 10 years.
Bankruptcy usually results in the most dramatic hit to your credit score because each account associated with a bankruptcy also impacts your credit score. However, you can recover from bankruptcy, even though it stays on your credit report for seven to 10 years. Through discipline and patience, your past credit mistakes will eventually drop from your credit report – as long as you can show that you’ve learned from your past.
If you’re looking to help your credit standing, the best thing you can do is to make your payments on time and don’t overuse your available credit. Your good credit habits will be reported and your past credit mistakes will eventually drop off your credit report. Be sure to stick with your financial goals and you should see your good habits reflected in your credit score.
No Credit Card Required
About the Author
John Csiszar began writing in 1989 and his work appears in various online publications, including The Huffington Post. Csiszar earned a B.A. in English from UCLA and served 18 years as an investment adviser and certified financial planner.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.