How long do closed accounts appear on my credit report?

Posted by Tom Magor in Personal Finance on 2 May 2018 - Tom is a Senior Credit Analyst at checkmyfile.

Some people believe that as soon as a credit agreement is settled and closed, it will no longer be reported to the UK’s Credit Reference Agencies and therefore will no longer have an influence on future credit applications. However, this is a popular misconception, one that could affect your ability to get credit if not correctly understood.

An account is typically considered closed when an agreement has come to an end and the on-going relationship between the lender and borrower has ceased. For instance, when a loan has been repaid in full, a bank account has been formally shut down, or when you clear and cancel a credit card.

Reporting accounts

Payment history, both positive and negative will be reported by Credit Reference Agencies for six years from the date of the account closure. After this time the account, payments and any other trace of the agreement will no longer appear on your account.

The impact on your credit rating can be good or bad, depending on how the account was managed whilst it was open. If the account was always paid on time, and perfectly maintained, it will act as an endorsement of your ability to manage credit well, long after the account is closed. On the other hand, any late payments made during the previous six years will also stay visible to potential new lenders, and could harm your ability to get credit.

How do accounts that have closed as a result of Default appear?

An account that has fallen into default also counts as a closed account but in this circumstance, the lender considers the relationship with the borrower to have been broken due to them not adhering to the terms of the agreement, rather than a mutual parting of the ways. There is also likely to be an outstanding debt that will need to be repaid even when the account is no longer technically active. For this reason, a defaulted account will be viewed less favourably by potential lenders than accounts that have been closed and fully paid up.

A defaulted account will continue to be reported for the standard 6 years that negative information appears on your credit file, after which time it will no longer be reported.

It’s likely that the lender will seek repayment of any outstanding debt as quickly as possible. This may involve them ‘selling’ the debt to a third party, and see a new account with a repayment plan appear on the credit file. The repercussions of not repaying a defaulted amount can be serious, with lenders holding the right to turn to a court to try and recover any amount it is owed. Should that happen, then the addition of a CCJ will further the negative impact on your credit rating.

Will all lenders interpret the information in the same way?

While the information will visible to any lender checking your credit report, how it’s interpreted would depend on the individual scoring and acceptance criteria of each organisation. Similarly, while the information – good or bad – will continue to have an impact for the whole time it appears visible, that impact may lessen over time, especially if there are other active accounts helping to paint a picture of what sort of borrower you are.

You can see and compare how your own repayment history is reported - and how it differs - at Equifax, Experian and TransUnion when you subscribe to checkmyfile. You’ll also see important public data being reported by all four Credit Reference Agencies, including whether or not you are on the electoral roll or if there is any court information recorded against you.

You can sign up to the UK's most detailed credit report free for 30 days, then for just £14.99 a month, which you’re free to cancel whenever you want without quibble, either online, via phone or email.

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