Why is my account reported as closed?

Frustrated young woman staring at a computer and wondering, "Why is my account reported as closed?" Image: Frustrated young woman staring at a computer and wondering, "Why is my account reported as closed?"

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When it comes to credit report information, accuracy is of the utmost importance. Your credit score measures your creditworthiness and plays a huge role in your financial journey, so you wouldn’t want to be judged unfairly for a late payment that you didn’t make or an account that you didn’t close.

Unfortunately, the credit bureaus don’t always have the correct information. In fact, errors are probably more common than you’d expect — a 2013 FTC study found that one in four consumers identified errors that could affect their credit scores. Inaccurate information has the potential to negatively impact your credit health, so it’s important to ensure your account details are correct. Here’s the scoop on what to do if an account is being incorrectly reported as closed.

Why your account is reported as closed

Your account may be reported as closed for a variety of reasons:

  • You requested it. If you wrote to your creditor, canceled your account and got acknowledgement that the account was closed, it should come as no surprise that it shows up as “closed” on your credit reports. Closed accounts in good standing will typically remain on your report for 10 years, while negative payment history for these accounts may remain on your report for seven years.
  • You paid off or refinanced a loan. Paying off a loan usually closes the account. Since you’ve finished paying off your debt, you’ve fulfilled your obligation and the loan no longer needs to remain active. On the other hand, refinancing involves paying off your current loan with a new one, so you might see your old loan is closed (and a new one is added).
  • Your creditor closed it due to inactivity. It costs money for lenders to report to the bureaus, so if you don’t use your card for a long time, you become a drag to your issuer and they may close your account. To prevent this from happening, you could try keeping one small, monthly, recurring payment on accounts you want to keep active.
  • Your creditor canceled your account because of delinquencies. If you fall behind on your payments, your lender may choose to revoke your charging privileges and cancel your account. Do whatever you can to stay on top of your payments to avoid this unfortunate situation.
  • The credit bureau made a mistake. If this is the case and you have proof that the account should be listed as open, simply file a dispute to fix the error. We’ll cover how to do so in the next section.

What to do if you didn’t request to close the account

If you don’t know why your account is being reported as closed, contact your lender first to see if they can give you any insight. You’ll save yourself a lengthy dispute process if they can confirm that they intentionally closed your account. If you’d like to reopen your account, talking with your creditor may be enough to convince them to do so for you. Even if they won’t, you’ll at least know that it wasn’t a credit bureau error that caused the closure.

If, instead, your lender agrees that your account is still open, you’ll need to file a dispute. This generally involves marking the error(s) on your credit report, finding proof that your account isn’t closed, writing a letter and mailing everything to the appropriate bureau or bureaus. While it may not be fun, the time and effort you put into fighting incorrect information may be well worth the trouble if it results in a more accurate credit score.

Bottom line

Your credit score should accurately represent you. Closed accounts may negatively affect your credit health, so just as you would fight to defend your reputation, it’s important to ensure that the information that is used to judge your creditworthiness is just as spick and span.