Your Credit Report Account Statuses Explained

Do one thing: If you haven’t ever taken a look at your credit reports – and research shows at least a few million Americans never have – now is the time. To truly understand your credit report account statuses, you can download free copies from all three of the main reporting bureaus at annualcreditreport.com, or get a copy with SavvyMoney through online banking.

Learn the Lingo for Improved Financial Health  

When you look at your credit reports, especially if you are new to it, you’ll see that many of the terms used for account statuses aren’t self-explanatory. And, because there are three main credit reporting agencies – Equifax, Experian, and TransUnion –  generating reports for everyone out there with credit, the terminology used across those bureaus that land on your reports can also vary. 

Understanding Credit Report Account Status

Working to stay on top of your financial health is fantastic. Part of the challenge, though, is to understand what all of those different terms mean – and more importantly – what type of impact they may have on your credit score, the three-digit number that lets lenders and others know how well you manage your debts.

If you find all of this a little befuddling, you’re not alone. A financial literacy survey of 1,000 U.S. adults shows there is still some confusion about credit scores and exactly how they are calculated. The study found: 

• 22% of respondents were not confident in their understanding of how credit scores are calculated.
• 14% of Gen Z members older than 18 report never checking their credit score.

Generally, credit scoring bureaus consider several factors when creating credit scores. Those include:

• Payment history
• Credit depth
• How much you owe compared to your total available credit limit
• Recent credit
• Available credit

Credit Report Account Statuses Defined

One piece of the information on your credit report is the account status for each credit line you currently have or have had in the past 10 years or so. Here’s a guide using data from the Consumer Financial Protection Bureau (CFPB) to help explain what each account status term means and the potential impact each could have on your credit score. 

• Open. The account is active and available for use.
  • For example, a credit card you still charge purchases to, or a loan that is still actively being paid. This can have a positive impact on your score if you pay all of your accounts on time every month.
• Closed. The account is no longer active. It may have been closed by you when a loan was repaid, paid off, closed by the lender, refinanced, or otherwise canceled.
  • Closed accounts often remain on your credit report for years as part of your credit history.
  • If a closed account was paid off on time by you, it shouldn’t hurt your credit.
  • Some closed accounts can have a negative impact if they were shut down because of non-payment.
• Paid. Also known as a paid collection, this means that an account that moved into debt collection because it was past due was later either paid in full or a debt collector accepted a partial payment to settle the debt.
  • If the original debt was reported to the credit reporting companies, the paid debt should typically be reflected in credit reports as a zero balance.
  • A debt that goes unpaid usually harms your credit score.
• Charge-Off. A creditor decided that a debt was unlikely to be collected and wrote it off as a loss (for business accounting purposes), often after several months of not being paid.
  • It’s important to note that a charge-off does not mean a debt was forgiven.
  • Collection efforts may still continue for this debt and will potentially impact your credit score.
  • Get more information about charge-offs and how to recover.
• Transferred. An account or debt that was moved from one creditor, owner, or servicer to another.
  • This can happen when a charged-off debt is assigned or sold to a collection agency.
  • The report may also identify the new owner of the debt.
• Sold. This happens when the original creditor sells the debt to another business (such as a debt buyer or collection agency).
  • The original account may show a $0 balance because the debt is now owed to the new owner rather than the original creditor.
• In Collections. The debt has been placed with or sold to a collection agency because it became delinquent.
  • Collection accounts are typically reported separately and can remain on a credit report for 7 to 10 years from the original delinquency date. 
• Disputed. This term appears when you challenge the accuracy of specific account information with a credit bureau.
  • Your credit report will generally show that the account is being disputed or has been disputed.

How to Improve Account Statuses for Stronger Credit  

While some account statuses can be neutral, without a negative or positive impact on your credit report, other terms reflect statuses that can harm your credit standing.

• The best way to improve a credit score that has been impacted by not paying debts on time is to make a concerted effort to pay all of your bills on time, every single month.
• One easy way to ensure bills are paid promptly is to set up automatic transfers from your checking account to the companies and agencies you owe.  

With reporting by Casandra Andrews