Status of accounts on your credit report

A more important question might be: Why is the “Status of Accounts” so significant to my financial health?

The “Status of Accounts” section is viewed by lenders so they can assess your creditworthiness. It also enables them to determine how high (or low) a lending risk you are and how high (or low) your loan interest rate will be. Below we’ve listed some common credit report account statuses and what they mean. Try to keep an eye on the account status section of your credit report(s) at least once a year. You don’t want to be in for any surprises down the line.

Pays as Agreed

This can sometimes show as “paid as agreed”. If the account is in good standing or was closed in good standing, it will show on your credit report as one of these two statuses. When you “pay as agreed”, it means that your payments to this account have been in full and on time as per the terms of the agreement with the creditor. For a bank or other lender to consider you to be a low credit risk, this section must be very positive.

Paid/Closed Never Late

This status means that you have paid off this particular account in full, without any late payments, and the account is now closed. Reports sometimes show Paid/Closed orPaid/Never Late, which to FICO mean the same thing.

Closing a credit card account can lower your credit score a bit, but should onlyhave a significantly negative impact if the account was closed by the creditordue to non-payment or other payment issues.

Account Paid in Full for Less Than Full Balance or Settled

Typically referred to as a “settlement” or “resolution of the debt”, this occurs when a creditor accepts less than the full balance as payment-in-full. When a debtor stops paying and the number of days since the most recent payment reaches 120 days, the account is no longer considered current and the creditor is required to write-off the debt. This doesn’t mean the debtor is no longer responsible for the loan or that the debt is forgiven.

The creditor can transfer the debt to a “late accounts” department for collectionor assign or sell it to a collection agency. This is where negotiations take place and if the debtor or agencynegotiate to let the debtor pay off the debt for less than the full balance,once paid, the debt is forgiven. Settling debt this way can have a verynegative impact on one’s credit score.

30 Days/60 Days/120 Days Past Due

If a scheduled account payment is missed by 30, 60 or 120 days, the lender mayreport the payment status to the credit bureaus as 30, 60 or 120 days late.There is a potential way of avoiding a late payment placed on your creditreport: due to how late payments are reported, there’s a bit of a grace period.For instance, if your credit card payment is only a few days or a week late, makingup the payment in full before the 30-day mark will help you sidestep thereporting of this late payment to the credit bureaus.

Once the late payment appears in your payment history, it will start to negatively impact your credit score. In addition, you can be charged a late fee almost immediately if you payment is 30 days late. After 60 days, your credit cardcompany can implement the penalty rate and place it on your balance each monthuntil you’ve paid on time for six consecutive months. Remember, paymenthistory makes up 35% of your FICO® Score. That’s why it’scrucial to make on-time payments a priority.

There are many other account status terms used by the credit bureaus that can help you see what’s goingon within your credit file. It’s a good idea to check your credit report fromat least one of the bureaus, at the very least once a year, to be certain thatthe information is correct and there’s nothing on your report that shouldn’t bethere.

At myFICO forums, you can read about other members’ experiences after seeing some of these account status terms on their credit reports… and how they handled them.

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Rob is a writer… of blogs, books and business. His financial investment experience combined with a long background in marketing credit protection services provides a source of information that helps fill the gaps on one’s journey toward financial well-being. His goal is simple: The more people he can help, the better.

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