In A Nutshell
Trying to remove a closed account from your credit report is a straightforward process, though you won’t always be successful. Let’s examine the six-step process for removing these closed accounts.
Did you know that when you close a credit account, it doesn’t automatically drop off your credit report?
Even worse, having these accounts—like personal loans or credit cards—listed is not always a good thing, especially if it was closed for non-payment.
But in some cases, you can get them removed.
Let’s walk through exactly how to remove a closed account from your credit report.
Removing a closed account from your credit report in six steps
Getting closed accounts taken off your credit report is a bit of a process and not all of them can be removed, but in some situations, it is possible.
We recommend following these six steps for every closed account that’s negatively affecting your credit.
And with a little patience and diligence, you have a good chance of making some headway.
1. Review your credit reports for inaccuracies
Credit report inaccuracies are a much bigger problem than you might realize. According to the FTC (Federal Trade Commission), at least one in five consumers have an error on their reports.
And even more troubling is that in their follow-up study, they found that even after disputing the items, a lot of them are still there.
This doesn’t mean there’s no hope, it just means that you need to be diligent about keeping an eye on your reports and following up on disputes.
To get started, get your credit report from all three bureaus: Equifax, TransUnion, and Experian. You’re entitled to one free copy per year from AnnualCreditReport.com.
Next, you’ll want to check the reports for inaccuracies. If an account was closed with an amount due, make sure they listed the right amount.
Also, make sure they didn’t list any late payments incorrectly. And look for anything else that could be wrongly reported.
Any errors on your accounts need to be reported immediately to the credit bureau and/or creditor in the form of a dispute. In some cases, this may get the account removed entirely.
2. If you find the account is actually still open, dispute it
Occasionally, you might find that a creditor mistakenly reported your account as closed when it is actually still open. If this is the case for you, dispute it immediately.
If you wish to continue using the account, your best course of action is to speak directly with your creditor over the phone. Chances are, they simply made a mistake and they’ll be happy to remove the “closed account” record from your report.
If, however, you’d rather just try to have it removed and not continue to use the account, you can dispute the item with the credit bureau.
3. Write a goodwill letter to the creditor
Once you’ve disputed your closed account, you’ll need to wait 30-45 days to see if it’s removed. But if it didn’t work, the next thing you can try is a goodwill letter to request removal.
A goodwill letter can be used for any type of credit account. It’s simply a letter asking a creditor to remove a negative item on your report as an act of goodwill. And they are most effective for people who experienced a period of financial hardship that can be explained.
For example, say you had an event that caused you to lose income and rack up some hefty medical bills.
In this case, you might have a specified time period of late and missed payments in addition to your closed account on most of your lines of credit. You can use this to appeal to a creditor, especially if the activity was out of the ordinary for just that period of time.
But you don’t have to experience a catastrophic event in order to write goodwill letters to your creditors—there are many other reasons they might decide to show you pity as well. You might even just catch their representative on a good day!
When you’re writing these letters, be sure to use an appreciative tone. Your creditor has no obligation to accept your plea, so make sure you address them respectfully.
Secondly, take responsibility for your actions. Explain what happened in a way that gains their sympathy without shifting blame. And by the way, just forgetting to make a payment is probably not going to win anyone over.
This doesn’t mean you should lie, but do make sure you have a valid reason for wanting it removed.
This could be as simple as something like this: “Even though I was irresponsible in allowing this account to lapse, I am making every effort to correct my financial behavior.”
4. Write a pay-for-delete letter
Another alternative to try when a dispute doesn’t work is a “pay for delete” letter, which is basically a negotiation strategy that says you will pay off the account in exchange for them removing it from your report.
This tactic will only work, of course, if your account was closed with an unpaid balance, and usually after they’ve already tried other collection attempts.
5. Write a 609 letter
609 letters are types of disputes that basically require the creditor to validate the information on your account.
It’s based on Section 609 of the Fair Credit Reporting Act (FCRA) stating that you have the right to require that their creditors provide proof that they obtained your information legally. And if they can’t provide that proof, they are required to remove the item from your report.
Sometimes, these letters work because a company didn’t keep sufficient records. And sometimes they work because they’d rather not spend the time or resources locating and reporting these records.
This isn’t always the case, but once in a while, you’ll get lucky. And this is true of any of the letters, especially when the account is getting close to being dropped off your report anyway.
6. Wait for the account to drop off
The other option for removing a closed account from your credit report is simply waiting for it to drop off.
Fortunately, bad debt doesn’t stay with us forever—most of it drops off in 7 years.
One exception is an account that was paid as agreed, which will likely remain for 10 years.
How closed accounts affect your credit score
Closed accounts affect your credit in a few ways, as there are many different factors that go into calculating your score.
First, if the account had an outstanding balance, it is still affecting your credit utilization ratio on your credit score and FICO score. This factor accounts for 30% of your score, so if it’s a significant amount, it could be really hurting your credit.
Second, if the closed account was unpaid, it will count toward your payment history and your score could take a big ding.
Thirdly, if you close an account, it shortens the length of your credit history, which accounts for 15% of your score. This is not a huge amount, but if you don’t have much credit, it’s something to consider.
And lastly, closed accounts can affect the way a lender sees you.
While many types of lenders just have minimum credit score criteria, some also look at specific items. And if they see a lot of closed accounts, they may view you as more of a credit risk, making it harder to get approved for a loan, credit card, and mortgage, while also having an impact on the interest rates you will pay.
When should you remove a closed account?
It’s somewhat of a popular misconception that any closed account hurts your credit. But this is really only true if the creditor is the one that closed the account.
If you closed the account while it was in good standing, it’s probably only helping your score.
But if a creditor closed an account, especially for non-payment, it would serve you well to try to have it removed. And if you still have that outstanding payment, it’s hurting your credit utilization ratio, so it should definitely be removed if possible.
If your closed account is nearing the end of its 7-year shelf life on your report, you might be better off waiting for it to fall off. But on the other hand, 609 or goodwill letters can be pretty effective during this time.
The choice of whether or not to pursue this task depends on how big of a hurry you are in to repair your credit.
It’s a good idea to continually work on it. But if a negative item should be falling off in a couple of months, it will probably be just as fast to wait it out.
5 tips for improving your credit score
After you’ve gone through the steps to get these items removed from your credit, you might be looking for some guidance on continuing to improve your score.
These few tips are what most people use to stay on this course. And if you’re diligent with your finances, they will definitely work for you.
1. Make 100% of your payments on time. This is the biggest part of your credit score equation, accounting for 35% of all the scoring models.
2. Check your credit reports frequently. Because of the number of reporting errors consumers find, it’s important to make sure yours is accurate. Sites like Credit Karma and Credit Sesame allow you to check your credit free any time you want. Keep in mind, however, that these don’t give you information on all three credit bureaus.
3. Keep your balances low. Most experts recommend only using about 30% of your credit at all times to keep your credit utilization ratio low.
4. Don’t apply for credit too often. Each time you apply for credit, it shows up as an inquiry on your report. They don’t affect your score too much, but every point counts when you’re trying to make improvements.
5. Consider getting a secured credit card. This only applies if you are trying to boost your score, but are having trouble getting approved for an unsecured card. Opening a secured credit card and making your payments on time is a fast way to improve your credit.
Final thoughts
Of the many actions you can take to repair your credit, getting closed accounts removed is one of the most helpful.
And if you take the steps laid out for you here, you could be on your way to a better score within 30 days. Just be patient and follow up.
There are no guarantees you can get the items removed, but it’s usually a chance worth taking.
