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When you close an account, it may not be removed from your credit report immediately. This is true whether the closed account is a credit card or an installment loan.
Closed accounts stay on your report for different amounts of time depending on whether they had positive or negative history. An account that was in good standing, with a history of on-time payments when you closed it, will stay on your credit report for up to 10 years. This generally helps your credit score. Accounts with adverse information may stay on your credit report for up to seven years.
Adverse information is anything a potential creditor might see as negative, such as late payments or accounts that go to collections. Both late payments and collections will fall off your credit report seven years after the date of the original delinquency. A common misconception is a collections account will fall off a credit report once it’s been paid. Whether paid or unpaid, a collections account will stay on your credit report for up to seven years. One special case is for New York residents – paid collections will fall off their credit reports after five years.
Another exception is medical debt. As of July 1, 2022, medical debt will be removed from your credit report when paid in full. Unpaid medical debt won’t appear on your credit report for a year from the date of the original delinquency. This gives you time to work with your insurance or healthcare providers to address the debt before it’s reported on your credit file. In the first half of 2023, medical collection debt under $500 will no longer appear on credit reports.
Bankruptcies stay on your credit report for different lengths of time depending on the type. A Chapter 7 bankruptcy will stay on your report for 10 years from the date the bankruptcy was filed. A Chapter 13 remains on file for seven years. A Chapter 13 bankruptcy falls off a credit report faster because people agree to pay some of the debt back through a payment plan. However, if the repayment plan isn’t completed it’ll remain on your report for 10 years.
After the allotted seven or 10 years, the bankruptcy will automatically fall off your credit report.
Though hard inquiries aren’t a type of account, they may occur when you apply for new credit. Hard inquiries will stay on your credit report for up to two years. Having too many inquiries in a short time period can negatively impact your credit score and may be a reason you get denied credit.
Here’s the good news: Closed accounts with a good history generally stay on your report longer than negative information. If you do have a derogatory mark on your credit report, time is the best healer – it’ll fall off your report eventually. To improve your long-term credit health, work on building good credit habits.