Closed account on credit report with a balance
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What does a closed account on credit report with a balance mean?
Bad news for your credit score
A closed account with a balance is considered by FICO as an “account NOT in good standing“, i.e. a serious derogatory. Very serious. Up to 100 points drop, to be exact…
Do you have also a charge-off account?
Or a collection account? Is this account new? How about late payments?The reason I’m asking is because maybe you can still do something…
Usually, 6 months or so after you stop making payments the lender considers the balance as uncollectible, closes the account, writes off the balance (an accounting term) and sell the debt for pennies to collection companies.
At this stage, the damage is done, and even if you pay off the collection company, the charge-off account will remain on your credit report for 7 years and will adversely affect your credit score. There is no way you can remove a charge-off account from your credit report.
On the other hand, if the closed account just popped up, you may still be able to pay off the original lender. In that case, the account will show $0 balance, which FICO considers as an “account in good standing”.
If this is the situation, you need to act fast. Call the lender TODAY and try to see if he is willing/able to accept a payment.
Gonna call right now. The account is new. I don’t have a collection yet. Only late payments. I’m gonna call him right now!
Got lucky
So I called up the lender (car dealer) and convinced him to re-open the account in return for me to make a single one payment for the total balance. No charge off account, no collection. But the late payments remain on my report.
Thanks for an excellent advice! I guess I learnt a lesson.
With pleasure
Good to know that my advice really helps someone. Tnx for letting me know.All the best.
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