Some of my accounts that are paid in full show "closed" instead of "paid in full." Does this hurt my credit rating? If my account is paid in full but did have delinquent payments throughout the term of the loan, can it be deleted seven years from the original delinquency date?
"Closed" and "paid in full" mean essentially the same thing, but the terms usually apply to different kinds of credit agreements.
Credit Card Accounts Show Closed
Revolving accounts, like credit cards, are referred to as "closed" when the account can no longer be used to make charges. Typically, you notify the lender to close the account when it has a zero balance and you no longer want the credit card.
However, a revolving account can be paid in full and still remain open. Credit card accounts will show "closed" with no balance rather than "paid in full" so that there is no confusion about whether the account is open to new charges.
Installment Loans Show Paid
"Paid," or "paid in full," is the term applied to installment accounts, like car loans, after the last payment is made and you have completed repayment of the loan as agreed. Since you can't use the account for anything else, once a loan is paid in full, it is essentially closed.
In both cases, the terms indicate a "final status," meaning the account is no longer active and cannot be used again.
Occasionally the terms are interchanged on accounts, but the underlying meaning is the same. Whether the account shows closed or paid in full, the most important factor is whether the payments were made on time.
How Long Late Payments Remain on Closed Accounts
Accounts that are "paid" or "closed" but that have delinquent payments in their history will be deleted seven years from the original delinquency date.
"Paid" or "closed" accounts that do not have delinquent payments or other negative information in their history will remain 10 years from the time they are closed. That ensures the positive information will remain longer than negative information, helping you build a long and stable credit history.
Thanks for asking.
Jennifer White, Consumer Education Specialist