Closed By Lender Vs. Closed By Consumer – Does It Matter?
by Connie BrooksWhen you voluntarily close out a credit card account, a notation is made in your credit report. The notation usually says “closed by consumer” or “Closed by consumer request.”
However if you have the account closed because you went past due, or because you go more than 6 months without using your credit cards, then the notation in your credit report will say “Closed by lender” or “Closed by Creditor.”
So, does it really matter what it says?
Well, yes and no.
The notation after the closed account will absolutely matter to a lender when you go to apply for a mortgage, a large personal loan, a home equity loan, or a car. These are all cases where the lender will pull your full credit report, instead of just checking your credit score.
Closed credit accounts are negative things in general – even if you requested them to be closed.
This is because closing a credit card account reduces the overall amount of credit that you have, lowers the average age of your accounts, and if you are carrying a balance on anything, it changes your debt-to-credit ratio.
Sometimes you really just need to close the account. If it makes the most financial sense to you – then do it. Just be aware that it does look slightly better to your future lenders if you are the one who closed the account, and not your credit card company.
You also have the right to attach a 250 word statement to any account listed on your credit report. So, if you are really worried about it, you can go in there and issue a statement about why you closed out the credit card account.
Again though, this will only matter if your lenders review your full credit report, and not just your credit score.
Credit card companies make decisions based off of your credit score alone – so it will never matter who closed the account out when you go to open up a new credit card.
Before you open or close any credit account, your should consider how the change will affect your credit score – because that will always matter far more than the reason an account was closed out.
Have a question for us? Leave a comment below!
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September 26th, 2008 at 13:13
In general, when applying for a major purchase, like a mortgage it is a good idea to review everything on your credit report before the lender does. Although many times the small details like this won’t make a huge difference, if there are enough of them they all add up. It is generally better to be proactive about getting the report cleared than reactive.
September 26th, 2008 at 17:33
Can you recommend a generic type of statement for people who want to close a credit card account just b/c they want it closed, or they think they have too many lines of credit open?
I’m curious if wording exists that could potentially give lenders a psychological moment of pause, or a vote of confidence in favor of the borrower, after reading the 250 word statement.
October 1st, 2008 at 02:49
How badly will it effect a credit score at the bottom of the “Good” range if a single bank closes/block 3 accounts because you have too much debt (given the current climate)? These accounts together have a substantial balance (>$20,000), though there is even more debt at other banks. (A fourth account w/ zero balance was closed because it had not been used for over a year). I have never missed a payment on any of these cards.
My concern is that this not spread to accounts at other banks that I use like cash (i.e., because they are close to their limit, I pay exactly what I spend, sometimes making 10 or more online payments a month). Thanks
March 17th, 2009 at 12:50
I received a letter from my credit card company stating that they were going to raise my rates. I have never been late and just consolidated most of my debt on this particular card with an attractive balance transfer rate. The letter said they were going to apply this increase to all past and future balances. Is this not like a bait and switch policy? Bait me to transfer to a lower rate then send me a letter stating they are not going to honor that rate?
My only real option was to tell them I would Opt-out. They said my credit report would reflect Closed at my request. It would be nice if they told the entire story as to why it was closed.
August 1st, 2009 at 18:12
Is there a time limit before items can be removed from a report? Also, what about the same account listed 4 or 5 times on the same report?
I also had several student loans and consolidated, but individual ones are still showing on report as transferred to another lender. I am in good standing with the consolidated lender.
February 25th, 2010 at 09:42
I have a credit card with a 20K limit that I use for vacations. Because I had not used my card for 6 months, my issuer cancelled my card without my knowledge. On my credit report it states that the card was closed by the consumer. What is the best way to have this reported on my credit report, or should I write an explanation. This will impact my credit because this was my longest standing card, and now my debt to available credit will be more. Any suggestions?