What Does Account in Good Standing Mean?

If you have come across the notation “account in good standing” on your credit report or from a lender, you might be wondering what does account in good standing means? We will explain what this notation means in much detail below.

What Does Account in Good Standing Mean?

The term account in good standing can mean a variety of different things. When the term appears under the account status on your credit report, this means that the account has never been late and has always been paid on time according to the terms of the agreement between you the borrower, and the lender. An account on good standing means different things from lender to lender. Some lenders refer to account in good standing for accounts that have been never been late, while others refer to accounts in good standing as an account that may have been delinquent on the past, but are currently being paid as originally agreed upon between the lender and the borrower. So, really the term account in good standing can mean different things depending on who is using the term.

An account in Good Standing on Credit Report

Open accounts that appear as being in good standing remain on your credit report for as long as the account remains open. Accounts in good standing will continue to boost your credit score so long as you continue to make your payments on time.

If you close an account that you’ve made all your payments on time, it will appear as an account in good standing on your credit report for 10 years from the date that you closed the account. It will have a positive effect on your credit score so long as it appears on your credit report. After the 10 year period, accounts in good standing are automatically removed from your credit report. So, if you have an account and you’ve made all your payments on time, never missing a payment, you should keep the account open as it will have a good impact on your credit score.

That said, if you have missed payments on your account, your account will not be in good standing. Accounts that are not in good standing will only appear for 7 years on your credit report from the date that you first became delinquent on your account. After the 7 year period, the account will be automatically removed from your credit report.

An Account in Good Standing From a Lender

Having an account that’s in good standing from a lender can mean several things, let’s explore the two most common situations:

Your account has always been in good standing because you’ve made all of your payments on time or your account is currently in good standing and paid as agreed even though you’ve missed payments in the past. Both of these situations could be considered as an account in good standing depending on how your lender defines an account in good standing.

What Happens If Your Accounts Are Not in Good Standing?

If your account is not in good standing, this typically means that you’ve failed to make payments on your account as originally agreed between you and your lender. Your payment history accounts for 35% of your credit score, so if your late payment is reported to the credit reporting bureaus, your credit score will suffer a significant drop. Usually, late accounts are only reported to the credit bureaus after a person has failed to pay his or her bills for 30 or more days. After 30 days, the account is reported as late and not paid as originally agreed. Another consequence of not making your payments on time is that your lender will most likely impose late fees and penalties. So, you should always strive to pay your accounts on time to avoid a negative impact on your credit score and to avoid the payment of late fees and penalties.

How to Keep Your Accounts in Good Standing?

Here are some tips to keep your accounts in good standing:

  • Setting up alerts to alert you when a payment is due so that you can pay your credit cards and loans on time
  • Paying your bills before the due date each month
  • Periodically checking your credit report to ensure that all of the info on there is accurate
  • Immediately notifying your lender of any unusual activity on your account
  • Don’t utilize too much of your available credit, you should only use 10% of your available credit and never exceed 30% utilization

If you follow these tips, you should keep your account in good standing. If you have any other questions or comments, please feel free to leave them in the comments section below.