The Better Credit Blog | Answering Your Credit Questions & Free Negotiation Dispute Letters

Reader’s Question

Dear Ryan,
I had a credit card that that the bank closed because of late payments. I know I have been paying on time and paid the credit card off 6 months later. The bank has offered to open the account again, but I am curious if this is a good or bad thing. On my report it says closed by creditor, if it is reopened will it just show opened?

My Response

Hi [name removed],
Generally, open credit card accounts look better on your credit report than closed accounts because open accounts show you have used the card responsibly –the card hasn’t been “closed by creditor“. Before doing anything, I would ask the creditor if they are going to open a new account or simply reopen the account they closed. If they are just going to open a new account, the “closed by creditor” entry on your credit report will remain and a new entry for the new account will be reported –this won’t do you any good. However, if they are actually reopening the closed account, this could possibly improve your credit because the “closed by creditor” entry will be changed to “open”. I would ask this before making a decision.

Hope this helps,
Ryan

Take Home Point

Credit card accounts marked as “open” on your credit report are generally better for your credit score than a closed account. This is due to a couple of things: First of all, an open account is building payment history. Payment history has a big impact on your credit score –the more history (positive of course), the better your score will be. Secondly, an open account indicates that you haven’t screwed up so bad that the creditor closed (or charged off) the account. Therefore, if given the opportunity, it’s wise to ask the creditors of any closed accounts on your credit report to consider reopening the account.

(2 votes, average: 5.00 out of 5)