Closed accounts and their duration on your credit report have become a common concern for many people. In this dig, we delve into the reasons behind listing closed accounts, what types of accounts get closed, why they linger on your credit report, and how they impact your credit score.
Unless you've somehow managed to bypass the usual financial routes most people take, you're likely to have some form of credit account. However, whether it's a credit card, a student loan, mortgage, or some other form of financial obligation, every credit account you open will someday be closed. But how long do these closed accounts stay on your credit report?
In most cases, closed credit accounts remain on your credit report for 10 years if the account had positive information, and seven years if the account had negative information according to Equifax. On the other hand, TransUnion maintains positive credit information for up to 20 years. However, several factors can affect this duration, and understanding them is essential for maintaining financial health.
Types of Closed Accounts
The type of closed account affects the amount of time the account remains on your credit report. This includes credit card accounts, instalment loans, mortgages, and student loans. The nature of these accounts, whether closed in good standing or had associated negative records such as late payments, significantly impacts the duration they stay on the report.
Why Closed Accounts Are Listed on Your Credit Report
Listing closed accounts on credit reports, especially the ones with a positive payment history, can be beneficial for your credit score. They provide potential lenders with a complete picture of your creditworthiness, showcasing your ability to handle credit responsibly.
The Credit Reporting Period for Closed Accounts
Generally, accounts that were always in good standing will stay on your credit report longer than those with negative information. Positive closed accounts stay on your Equifax credit report for up to 10 years. TransUnion maintains this information for up to 20 years. For closed accounts with negative history, the length of time the account remains on your credit report varies according to different factors, generally ranging from six to ten years, depending on the bureau and the province.
The Impact of Closed Accounts on Your Credit Score
Having a closed account on your credit report isn't necessarily a bad thing, as it can contribute positively to your credit history, one of the factors credit reporting bureaus use to calculate your credit score. However, if an account was closed due to payment issues or a bankruptcy, it could negatively affect your credit score until it eventually drops off your report.
Factors Affecting the Duration of Closed Accounts on Your Credit Report
Interestingly, various factors can influence how long a closed account stays on your credit report. These factors include the type of account, whether payments were made on time, your province or territory, and the credit bureau that generated the report.
In conclusion, understanding the lifespan of closed accounts on your credit report and their impact on your credit score is crucial for your financial stability. It's a good idea to regularly review your credit report, keeping an eye on closed accounts and ensuring all the information is correct. One incorrect negative item could pull down your credit score more than necessary. If you have a closed account on your credit report, and you're looking to apply for credit, a lender will able to see this and might consider it when deciding whether they should lend you money. So remember that taking care of your credit is a long-term investment to your financial health.