What Does “Closed” Mean on a Credit Report?

Your credit report contains a lot of information about each of your credit accounts. The term “closed” on your credit report means you no longer have a credit account open. This can apply to both revolving accounts, like credit cards, and installment accounts, such as personal loans or auto loans.

For revolving accounts, a closed account is an inactive card that you can’t use for new purchases or other types of transactions. For installment accounts, a closed loan could be one that you paid off in full or one that was closed and transferred to collections if you fell behind on payments.

Additional comments may describe the circumstances around the closure. For example, your report may indicate whether a credit card was closed due to inactivity, by the creditor for another reason, or at your request.

What Does “Paid in Full” Mean on a Credit Report?

An account that’s “paid in full” is a closed account with a zero balance. The terminology can vary depending on the credit report you review, where you requested the report, and your account’s details.

If you paid off a loan or closed a credit card without missing any payments, your credit report might say:

• Closed/never late
• Closed; was paid as agreed
• Paid and closed

Different language might be used if you previously missed payments and then brought your account current and paid it off, such as “paid; past due 30 days,” or if the account was paid in full after being refinanced, charged off, or sent to collections.

How Long Do Closed Accounts Remain on a Credit Report?

A closed account can remain on your credit report for up to 10 years and may continue affecting your credit scores. However, the timeline depends on whether the account was in good standing or past due when it was closed.

Accounts Closed in Good Standing

A closed credit card or loan that was in good standing when it was closed will stay in your credit file for 10 years. This means you were current on your payments and either paid off the loan or the credit card was closed and you paid the balance.

If you previously missed a payment, the late payment will be removed from your credit history after seven years. The rest of the account can still stay on your reports for up to 10 years if you brought it current before the closure.

Accounts Closed When They’re Past Due

If you missed payments and your account was closed when it was past due, the entire account will be removed from your credit report seven years after the original delinquency date. The original delinquency date is the first late payment in the series of late payments that led to the account closure. As a result, the account might be removed from your credit report sooner than seven years after it was closed.

What Does “Settled” Mean?

“Settled” means you came to an agreement with your creditor or a collections agency to pay less than the full amount owed. You won’t owe additional money on a settled debt, and the account could be updated on your credit report to show it’s paid in full and has a zero balance. However, creditors that review your credit report will know that you paid less than the full balance.

Settling or paying off collection accounts can be better for your credit scores than having an outstanding past-due balance on an account. Newer credit scoring models ignore collection accounts that are paid in full. However, settling your debt has serious drawbacks and is still worse for your credit than repaying a loan or credit card on time and in full.

Check Your Credit Report for Free

You can review your credit reports to see all the open and closed accounts that are still in your credit file. With a free Experian account, you can see your Experian credit report anytime. Your account also includes free credit report monitoring, FICO® Score updates, and real-time alerts about important changes in your report.

Contact O1ne Mortgage for Your Mortgage Needs

Understanding your credit report is crucial when applying for a mortgage. At O1ne Mortgage, we are here to help you navigate the complexities of your credit report and secure the best mortgage for your needs. Call us today at 213-732-3074 for any mortgage service needs. Our team of experts is ready to assist you in achieving your homeownership dreams.