Many consumers believe closing an unused credit account would no longer appear on their credit records. Credit reporting agencies are legally permitted to include all relevant and current information in your file under the Fair Credit Reporting Act. 1 Only incorrect or outdated information, or information that has been agreed to be deleted by the creditor, can be removed from your credit report. 2
What Exactly Is a Charge-Off?
Loans and lines of credit are extended with the expectation that the money borrowed will be repaid to the lender. Your account will become overdue if you fall behind on payments or cease making them. A creditor may charge off an account once it has been overdue for a significant time, usually between 120 and 180 days.
A charge-off occurs when a debt is considered uncollectable and is thus written off. Assigning or selling the account to a debt collector is a possible next step. The debt collector may then pursue legal proceedings to recover the debt. They may contact you by phone, send you written demands for payment, or even file a lawsuit in civil court to enforce payment.
Getting a Charge-Off Erased from Your Credit Reports
However, getting charge-offs and other lousy information removed from credit reports can be challenging. Accurate negative credit information may remain on your credit reports for up to seven years under federal law and, in some instances, even longer. Nevertheless, there are ways to cope with charge-offs. The first is challenging an incorrectly reported charged-off account. Under federal law, you have the right to file a dispute with the credit agency if you feel the information it has reported to you is erroneous.
What Happens When an Account Is Closed?
While you can no longer make purchases or withdrawals from a closed account, you still have until the due date to pay off any remaining debt by making the mandatory minimum payment. As soon as you terminate an account, your credit report will be updated to reflect the change.
For closed accounts that remain in credit, the creditor will continue to report payment history and account status to the credit agencies every month. 4 The most up-to-date amount, latest payment, and monthly payment history will all be included in your credit report.
Credit Report Cleanup: Erasing Closed Accounts
Closed accounts could hurt credit scores if closed for negative reasons, such as nonpayment or a charge-off. Your credit score might rise if you had that account deleted. Having a canceled account removed from your credit report is not always feasible or straightforward. You can utilize the credit report dispute process to have an open account listed on your credit report if the account is labeled as closed in error.
Any evidence you can provide on your account standing would be helpful. A credit card account marked as closed while still active might hurt your credit score, especially if the card carries a debt. Any additional inaccuracies, such as payments reported as late but paid on time, can be disputed before the account is canceled.
A goodwill letter is a formal request to a creditor to remove a settled debt from a consumer’s credit record. No matter how politely you beg, a creditor is under no obligation to grant your goodwill request. However, you could discover a creditor willing to compromise if you’re lucky.
The Cost of Erasure
A “pay-for-delete” approach can be used to remove a closed account from your credit report if there is a balance on the account. If you pay the debt in full, it will be removed from your credit record as promised in the pay-for-delete letter. Once again, creditors are not required to agree. Occasionally, creditors and debt collectors may be persuaded to delete an account of a consumer’s credit report in exchange for cash.
Attend for Accounts to Fall Off
You should know that closed accounts won’t remain on your credit report forever, even if you don’t take any action to erase them. You may be getting close to the credit-reporting time limit for the account to disappear permanently from your report. However, this may vary depending on the account’s age and status.
You might have to wait a few months for the account to be removed from your credit report and for your credit score to be updated if this is the case. Suppose the negative information associated with the closed account is more than seven years old. In that case, you can request that the material be removed from your credit report by filing a dispute.