Question: What is the appropriate method for reporting an account that has a zero balance and has shown no activity for an extended period, and how does this comply with the Fair Credit Reporting Act (FCRA)?
Answer:
An account with a zero balance and no recent activity may still play an important role in a consumer’s credit history. Even when there is no active repayment or balance owed, proper reporting ensures credit report accuracy and supports the requirements of the Fair Credit Reporting Act (FCRA).
Understanding Inactive, Zero-Balance Accounts
These accounts may include:
- Paid-in-full credit cards that remain open
- Installment loans that have reached a $0 balance but have not been closed
- Dormant but active tradelines with no new transactions
Such accounts are not inherently negative and may in fact benefit the consumer’s credit profile—especially if they represent a long history of positive behavior.
Steps for Reporting Zero-Balance, Inactive Accounts
1. Continue Reporting the Account Monthly
Even if there is no balance or activity, furnishers are encouraged to continue monthly reporting for the duration the account is open. This includes:
- Account Status: Typically “Current”
- Balance Amount: $0
- Scheduled Monthly Payment Amount: $0
- Date of Last Payment: Reflecting the last actual transaction or activity
Maintaining a consistent data stream ensures lenders and CRAs have a clear and uninterrupted view of the account’s status.
2. Do Not Automatically Close the Account
An account with no activity does not need to be closed unless:
- The consumer or creditor specifically requests closure
- The terms of the credit agreement mandate closure after inactivity
Prematurely closing accounts can negatively affect the consumer’s credit score, particularly by reducing credit age or utilization capacity.
3. Use Appropriate Status and Comment Codes
If reporting inactivity, use standard status codes such as:
- “11 – Current/Account in good standing”
- Include a Special Comment Code if applicable (e.g., “No recent activity” is not required but may be used in internal systems)
Avoid codes that imply delinquency, charge-off, or closure unless those actions have occurred.
FCRA Compliance Requirements
To remain compliant:
- Do not fabricate activity: If no payments have been made, do not report new payment dates or balances.
- Ensure accuracy in dates and balances: DOFD should remain unchanged if no new delinquency occurs.
- Retain historical data: Do not erase or “refresh” old information unless correcting an error.
Impact on the Consumer’s Credit Report
- Supports Length of Credit History
Older accounts—even if inactive—help maintain the average age of accounts, a key credit scoring factor. - Preserves Credit Utilization Ratio
Open revolving accounts with zero balances can positively impact utilization, improving credit scores. - Demonstrates Responsible Management
Continued visibility of long-standing, paid-off accounts reflects favorably on the consumer’s ability to manage credit.
Conclusion
Accounts with zero balances and no recent activity should still be reported regularly and accurately. By keeping the account open, reporting as current with a zero balance, and preserving all historical data, furnishers remain compliant with the FCRA while helping consumers maintain a strong, consistent credit profile.