We guarantee that you will be an active authorized user for two reporting cycles, which is approximately two months. During this time, the tradeline will be reported as an open account.
After the two months of being an active authorized user is complete, the authorized user will then be removed from that account and the tradeline will then appear as a closed account, but it will usually remain on your credit report as being part of your permanent credit history. Many banks will continue to report this closed account for as long as 7-10 years, but it may fall off the report sooner depending on the bank.
Open accounts typically hold much more weight than closed accounts, so tradelines should be thought of as more of a short-term maneuver with possible longer-term secondary benefits. In many credit scoring models, we have seen evidence that closed accounts often continue to have an impact on someone’s overall credit picture.
Real World Example
We have seen a credit report in which the person had a 720 credit score but they did not have any open accounts at all. Their entire 720 credit score was comprised of strictly closed accounts. Obviously, they were all very good accounts, most likely with significant age, perfect payment history, etc, but the take-home message is that closed accounts clearly do still count.
However, it should be noted that closed accounts will have a diminishing impact as time goes on. This is due to the credit bureaus giving weight to the recency of events.
For example, a one-day-old collection account will hurt someone’s credit score more than a five-year-old collection account.
In this example, the five-year-old collection account will have a much weaker impact on someone’s credit score when compared to the impact a one-day-old collection account will have on the person’s credit score.
In much the same way, the benefits of a positive but closed account will also diminish over time.
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