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Question: My credit card account was closed 6 years ago. I paid a reduced payment at the request of the credit card company, but never missed a payment. Unbeknownst to me, they closed my other account. I can no longer make purchases, but I technically still have an account with them. When I went to have it opened back up, they said there was nothing that could be done once it was closed. I have a small balance left but will have it paid off very soon. Is it hurting my credit more now? Creditors can close a credit card account without the user’s permission for many reasons and without warning. Generally, this happens if there’s prolonged inactivity, overspending, or a history of missed or late payments. They are also likely to close the accounts of users participating in hardship programs or payment plans, which seems to be your case. Once your credit card is closed, you can no longer use that credit card, but you are still responsible for paying any balance you still owe to the creditor. In most situations, creditors will not reopen closed accounts. Closed accounts and your credit reportsClosing a credit card can hurt your credit score because it affects your utilization ratio, which is the second most important factor determining your score after your payment history. Your utilization ratio is how much you owe on your credit card accounts compared to how much credit you have available. The negative effect of a closed account on your credit report depends on the circumstances leading up to the closure and the health of your current credit report. If your account was closed six years ago, the worst of it is already behind you. The effect of negative accounts lessens with time, so your closed account is no different. However, the remaining balance is still affecting your utilization ratio. So, it’s a good idea to pay the remaining balance and move forward with a plan to rebuild your credit. Tips for rebuilding your creditThe path to rebuilding your credit will be as unique as your credit report. The general advice to boost your credit report consists of paying on time and keeping your credit utilization low. Then, you can work on maintaining a healthy mix of credit cards and loans while opening new credit sparingly. Ultimately the right strategy for you will depend on your current circumstances. For instance, do you have any other credit cards besides the one that was closed? If so, you can
focus on using those credit cards strategically. If you don’t, you will need to open a new credit line. For example, you can open a starter credit card or a secured account to help you establish a positive credit history until you can get a regular credit card. / Tuesday May 10, 2022 View all posts Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when posted. Seeing closed accounts on your credit reports might make you worry that something is wrong. But before you jump to the worst-case scenario, keep in mind that creditors close accounts for multiple reasons, and they’re not all bad.A creditor may close an account because you requested the closure, paid the account off or replaced it with a loan, or refinanced an existing loan. Your account may also be closed because of inactivity, late payments or because the credit bureau made a mistake. Whatever the reason, it’s important to make sure the information that’s being reported is accurate because incorrect information can negatively affect your credit. Read on to learn more about why an account might be closed, what it means and what you might be able to do about it.
Why closed accounts may be on your credit reportThere are several reasons an account might be reported as closed. Some may need your attention, while the rest aren’t cause for alarm.
How a closed account might affect your creditThe effect of account closure on your credit depends on multiple factors, including the amount of available credit you’re using, the length of your credit history, the status of the closed account and the accounts that are still open. Here are a few things to watch out for when an account is closed. Your credit utilization may increaseYour credit utilization rate is the portion of revolving credit you’re using compared to how much you have available — generally expressed as a percentage. If you close a revolving account, such as a credit card, the total amount available decreases. When that happens, your credit utilization could increase, which may lower your credit scores. In general, most experts recommend keeping your rate below 30%. Closed accounts may stay on your credit reports for up to 10 yearsOne of the factors used to calculate your credit scores is length of credit history — the longer the better. Old accounts in good standing remain on your credit reports for up to 10 years, which may increase the average age of your accounts and improve your scores. But when the account falls off after 10 years, the length of your credit history may decrease, which could cause a temporary drop in your scores. On the flip side, if you have a closed account with a negative history, such as delinquencies, the derogatory information in many cases will remain on your reports for seven years. While it’s there, it will negatively affect your credit history, but the impact on your scores can diminish over time. Your credit mix may changeUsing a mix of different types of credit may have a positive effect on your credit scores. If an installment account, such as a car loan, falls off your credit report, leaving only revolving accounts, or vice versa, your credit scores might drop. What to do if you find a closed account on your credit reportIf you have a closed account on your credit report, what you need to do next depends on whether you know why it was closed and if the information is correct.
Next steps: How to recover if your account is closedIf you’re worried about your credit scores dropping after an account is closed, you may want to consider these ideas.
The solution that’s right for you depends on your personal financial situation. Before taking on new debt, be sure to weigh the pros and cons. And apply for new credit sparingly because doing so generates hard credit inquiries, which could ding your scores. No matter what you decide, it’s important to monitor your credit history to make sure all the information is accurate. If it’s not, it could affect your ability to qualify for a new loan or credit card. You can get a free copy of your Equifax, Experian and TransUnion credit reports once every 12 months at annualcreditreport.com. About the author: Jennifer Brozic is a freelance financial services writer with a bachelor’s degree in journalism from the University of Maryland and a master’s degree in communication management from Towson University. She’s committed… Read more. Do you still have to pay closed credit accounts?What happens to your balance after you close a credit card? When you close a credit card that has a balance, that balance doesn't just go away — you still have to pay it off. Keep in mind that interest will keep accruing, so it's a good idea to pay more than the minimum each billing period.
Should I pay off closed accounts on credit report?If the account defaulted, it could be transferred to a collection agency. Paying off closed accounts like these should improve your credit score, but you might not see an increase right away.
What happens when an account is closed on your credit report?Closed accounts, whether they were closed by you or closed due to payoff or transfer to another lender, are not automatically removed from the credit report. The status of the account will be updated to show that it is no longer open, but the payment history of the account will remain on your report.
Do I have to pay closed collections?A collection agency is a third-party vendor that will try to contact you in an attempt to collect your debt. Some people don't know what to do about unpaid collection accounts on their reports. It's important to note that you're still legally obligated to pay this debt.
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