Your credit reports list a variety of personal and financial information, including both open and closed accounts. If this information is positive, it helps to boost your credit score. If it is negative, it brings your score down. This information stays on your credit reports for a certain length of time, after which it should drop off your report. If it does not, and if it is negative information, you can challenge it.
Closed accounts on your credit report are significant because they have a direct effect on your credit score. According to FICO, the major credit score provider, your payment history makes up 35 per cent of your overall credit score. If you have a closed account on which you always made on-time payments, it will contribute to a higher score. If you were frequently late with your payments on the closed account, it will bring your score down as long as it remains on your credit report.
There are many types of closed accounts that will show up on your credit report. Your credit card accounts will appear, as will closed mortgage accounts. Closed loans will show up, too, including personal and car loans. If you financed furniture, appliances or anything else through a store account and closed it, that will show up, too.
According to the Experian credit bureau, positive accounts that have been closed will stay on your credit report for 10 years. It is beneficial to have this information on your credit report for as long as possible, since it has a good effect on your credit score. If you want the account to remain on your credit report indefinitely, don't close it once it has been paid off. It will sit there with a zero balance permanently unless you close it later.
Experian says that negative closed accounts remain on your credit report for seven years. This starts from the date of your initial late payment. A closed negative account will have a bad effect on your credit score for as long as it remains on your report, although its effect will lessen over time if you consistently pay your current accounts on time. If you have a negative closed account on your credit report and believe that it contains incorrect information or that it cannot be verified, you can file a dispute. If the credit bureau cannot verify the information, the negative account will be removed immediately.
Even though negative closed accounts are supposed to be removed from your credit report after seven years, this does not always happen automatically. If you have negative closed accounts that are due for removal, request a copy of your credit report from each of the three bureaus. TransUnion, Experian and Equifax all must give you a free copy upon request each year. If you find that any negative closed accounts are still there after seven years, file a dispute to have them removed.