credit score

The Impact of Closed Accounts on Your Credit Score

Q: Hi Lynnette, I have been working at repairing my credit for the last 4 years (intensely).

I have paid off all debtors and have managed to obtain an unsecured credit card with $1000 limit that has been upped to $5000 due to my handling of the card.

This month I pulled my credit file (both Equifax and Transunion) only to find a new account that was open in 2001 has been added since 2013 to the tune of $400.

Read: The Difference Between Equifax, TranUnion and Equifax Credit Reports

I don’t have any money to pay that right now…What can I do? Can they do that after so long?

A: First, let me say “kudos to you!” for paying off debt and handling your newer secured cards so well that your credit limits have been raised significantly and you’ve not had missed payments. You are definitely on the right track and are doing the right things to build/rebuild an excellent credit rating.

Second, let me put your mind at rest about the old credit card debt that you mentioned. I seriously doubt that this particular account is lowering your credit score, even though it has somehow turned up on one of your credit reports.

From the looks of things: you have not made any payments on this account since 2001; additionally, the account was closed at your request, and your credit reports show no late payments in the last 6 years.

Based on all these factors, it’s not likely that this account is damaging your credit rating. Unfortunately, these things do kind of pop up, often it’s when an account is sold to a third party.

But at this point, my advice would be to not fret over that account, even with the $400 balance that’s showing.

I would not reach out to the company or write them or anything. This is probably best left alone since the statue of limitations on the debt (if you truly didn’t pay it off back then, in 2008 or before) has likely expired — meaning you are probably not legally responsible for this obligation anyway.

Also, it seems from your previous correspondence that no one has contacted you about this debt, or demanded payment — another sign that it’s probably not being actively reported to the credit bureaus as a current obligation.

Finally, you should know that when your FICO credit score is calculated, they’re basing it largely on “Open” active accounts — not old, closed accounts.

Those closed accounts are taken into consideration to help determined the “average age” of your credit and to see how long you’ve managed credit, etc. But overall, closed accounts aren’t as significant to your credit health as your open/current accounts.

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