So what do closed accounts really do for credit?

[Anonymous]

Here's a question I haven't seen an answer to yet:

I have so many closed accounts reporting on my credit file, I would like to know if they are helping my credit in any way.

Some accounts have been closed for a while and the lenders are still reporting them (heaven knows why), and some are closed and haven't had any reporting since 2002 or earlier.

My questions:

1.)  Will the closed accounts magically drop off my CR after a certain period of time, like a derogatory will after 7 years?

2.)  If the accounts are not doing anything (positive or negative) is it a good idea to dispute them in hopes that the CRA will just delete them?

I wasn't sure if an old closed account with positive payment history (BACK THEN) does anything positive for me (NOW).

Thanks all!

[haulingthescoreup]

Hi, welcome to the forums!

In fact, this gets discussed here a lot. Old clean accounts are nothing but great for your history and scores.

Usually closed accounts drop off after 10 years. Sometimes they drop sooner, and sometimes they stay on longer. (Shhhh!!!)

And you don't dispute accurate info.

You might want to read this: The Son of Credit Scoring 101

eta: whoops, I see you've been here a while. Well, welcome anyway! And btw, I would kill to have more old clean accounts on my reports. I'm going to have a lot of stuff start dropping off soon, and my AAoA will be trashed.

[RobertEG]

The fact of the matter is that there are absolutely no statutory or regulatory provisions for dropping of an account from your credit file, or your credit report.

The FCRA, under section 605(a), only regulates how long derogs reported under the account can remain in your credit report.

Accounts drop from your CR in only one of two ways.  If the party with whom you had the account reports its deletion to the CRA, then the CRA will delete it at that time.

Acount closure, either at your request, or theirs, is not the same as account deletion.  It is just an update of reported account status.  However, once closed, the creditor/debt collector may additionally delete the account.  That is why, in such things as a PFD or GW letter, you never ask for account deletion, you only ask for deletion of the derogs under the account.  They usually wont delete a closed account that has prior, reported derogs, and remains unpaid, since they want the clout of the credit reporting as future incentive for collection of the debt.  But if the account is closed in good standing, they also might want to just purge it from their database, and thus report a complete account deletion to the CRA.

Most creditors wont, simply because of account closure, then delete the entire account, but they can. 

Then comes the issue of independent deletion of an account from your credit report based solely upon action by a CRA. Why would they do it, and when?

The CRAs are well aware of the credit reporting issues set forth in FCRA 605(a), such as dropping of monthly lates after 7 years, the dropping of OC and CA reporting after 7 1/2 years from DOFD, and the dropping of certain public recordfs after 10 years.  So it is a logical inference that, once an account reaches more than 10 years from its date closed, then any FCRA 605(a) issues are no longer of significance.  Since they receive at least 100 million monthly updates to credit files, they may choose to delete old baggage over which they no longer have responsibility to include in any credit report they issue, and just delete it after 10 years.

I personally have an old account, closed for 30 years, that is still in my CR.  A real boost to my date of oldest account, and my AAoA.  But it could disappear tomorrow.   So it is a, maybe they will, maybe they wont.

[Anonymous]

so let me ask this... I have about 20 accounts on my credit report which show discharged in chapter 7 bankruptcy.  Assuming the lenders stop reporting the accounts, and the "discharged in chapter 7" comment remains, what will eventually happen 7 years after the first delinquency?  will the entire account drop off my report; could the account remain on my report but the negative "discharged in chapter 7" status change to simply "closed"?  or will nothing happen at all?

I'm thinking if the accounts stay on my report, but with no derogatory info, this is the best scenario.

[RobertEG]

What was discharged in BK was their ability to collect on the unpaid debt, not deletion of their prior account reporting or earlier drop off of derogs thereuder from yur CR.

The accounts can remain forever.  What you owe on a debt is not what is primarily scored by FICO.

With regard to credit scoring of each account, each monthly derog reported on the account still remains for 7 years from its own date of delinquenccy.  FCRA 605(a)(5).   Each CO or CA remains for 7 years after the DOFD on that OC account plus 180-days.  FCRA 605(a)(4) and 605(c).  What must be updated in the account is a $0 balance owed.

The BK is a separate posting to your CR, and is indendent of delinquency dates on the dscharged account.  The BK remains until afer 10 years from the date of entry of the order for relief or the date of adjudication. 

Thus, you have muttiple dates for any one account that determine when its associated reporting of derogs will indpendently cease to be permitted to be included in any CR that the CRA issues  So again, it is not a matter of any account deletions.  Yes, once all the derogs are gone, the good stuff remaining, such as age of account, will still be beneficial.