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Closed Accounts

The Difference Between “Closed” and “Paid-in-Full”

Dear Experian,

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?

- OGG

Dear OGG,

"Closed" and "paid in full" mean essentially the same thing, but the terms usually apply to different kinds of credit accounts.

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In both cases, the terms indicate a "final status," meaning the account is no longer active and cannot be used again.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

Late payments remain on a credit report for seven years. If an account is delinquent and then brought current prior to being paid in full or closed, the late payments on the account will be removed seven years from the original delinquency date, but the account itself could remain up to 10 years from the date it is closed or paid in full.

On the other hand, if the account is delinquent at the time it is closed, the entire account will be removed seven years from the original delinquency date.

How Long Positive Accounts Remain on a Credit Report Once Closed

Positive accounts that do not have delinquent payments or other negative information in their history may remain for 10 years from the time they are closed. Keeping positive information longer than negative information helps you build a long and stable credit history.

Thanks for asking.
Jennifer White, Consumer Education Specialist

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