What Happens When an Account Is Reported as “Closed by Credit Grantor”?

When an account is reported as “Closed by Credit Grantor,” it means that the lender, not the consumer, initiated the closure of the account. This status can raise questions for both consumers and lenders, as it may signal potential credit risk or simply reflect a lender’s internal business decision. Properly reporting this account closure status is essential for compliance with the Fair Credit Reporting Act (FCRA) and for ensuring accurate consumer credit profiles.

Understanding “Closed by Credit Grantor”

Accounts may be closed by a credit grantor for several reasons, including:

• Inactivity: The lender shuts down an account due to lack of use.
• Risk Management: The lender closes an account due to high credit utilization, missed payments, or perceived borrower risk.
• Delinquency or Default: If the borrower is severely delinquent, the lender may close the account to prevent further charges.
• Portfolio Adjustments: Lenders occasionally close accounts due to business restructuring or financial strategy shifts.

Steps for Reporting an Account as “Closed by Credit Grantor”

1. Update the Account Status Correctly
   • The Account Status should be updated to “Closed” with the correct closure reason.
   • If the account was in good standing before closure, report it as “Closed – Paid as Agreed.”
   • If the account had a delinquent balance at closure, reflect the correct payment status (e.g., “Charged Off” if applicable).
2. Use Special Comment Codes for Transparency
   • Lenders should apply a Special Comment Code to clarify why the account was closed:
     • “Closed by Credit Grantor” – Indicates lender-initiated closure.
     • “Closed – Consumer Request” – If the consumer initiated the closure.
   • These codes help distinguish between consumer-initiated closures and lender decisions.
3. Preserve the Consumer’s Payment History
   • Ensure that the Payment History Profile remains intact, reflecting on-time payments, delinquencies, or charge-offs before closure.
   • Do not erase positive payment history simply because the account was closed.
4. Report the Account Balance Accurately
   • If the account was closed with a balance, continue reporting the balance until it is paid off or settled.
   • If the account was paid in full before closure, update the balance to zero to reflect that the consumer no longer owes on the account.
5. Notify Consumer Reporting Agencies (CRAs) Consistently
   • Any account closure must be reported to all CRAs simultaneously to maintain consistency across credit reports.
   • Mismatched reporting across bureaus can lead to consumer disputes.

Compliance with the FCRA

The FCRA mandates that all credit reporting be:

• Accurate – Ensure that the closure reason is properly classified and does not misrepresent the consumer’s financial standing.
• Complete – Retain full payment history and balance details to provide a complete record.
• Timely – Submit closure updates immediately to prevent confusion in consumer reports.

Impact on the Consumer’s Credit Report

1. Credit Score Considerations
   • If the account was in good standing before closure, the impact on a credit score may be minimal.
   • If the account had a balance or late payments, closing the account may lower the credit score by reducing the consumer’s available credit and increasing their credit utilization ratio.
2. Transparency for Lenders
   • Properly reported closure reasons help lenders evaluate a consumer’s creditworthiness.
   • A consumer-initiated closure is generally viewed more favorably than an account closed due to risk factors.

Conclusion

Reporting accounts as “Closed by Credit Grantor” must be handled accurately and in compliance with the FCRA. By updating account statuses correctly, preserving payment history, applying Special Comment Codes, and ensuring timely reporting to CRAs, lenders help maintain fair and transparent credit reporting.