CLS stands for "Closed" on your credit report. It means a credit account is no longer active for new transactions.
But here's what most people don't realize is that CLS appears whether YOU closed the account or your CREDITOR closed it, and that difference can cost you thousands of dollars in higher interest rates.
I'm writing this guide because credit report codes confuse millions of Americans. You check your report, see mysterious abbreviations like CLS, and have no idea if it's helping or hurting your score. This confusion leads to missed opportunities to fix errors and improve your credit.
Here's what you need to know about CLS codes:
- They appear on 60%+ of all credit reports
- They can drop your score by 10-50 points, depending on circumstances
- Many CLS codes contain errors that you can dispute
- Understanding them helps you maintain better credit health
Let's break down exactly what CLS means, why it matters, and what you should do about it.
What CLS Tells You About Your Account
When you see CLS on your credit report, you're looking at an account that's been shut down. No more charges. No more payments (unless there's a remaining balance). The account is done.
Here's what a CLS entry looks like:
- Account Type: Credit Card
- Creditor: Bank ABC Visa
- Status: CLS
- Date Closed: 03/2024
- Balance: $0
- Payment History: 48 months on-time payments
The CLS code itself is neutral. It's just stating a fact: this account is closed.
What matters is the context around it:
- Who closed it (you or the creditor)
- Why it was closed
- What your balance was when it closed
- Your payment history before closure
- How long the account was open
These details determine whether CLS helps, hurts, or barely affects your credit score.
Why Accounts Get Closed (And Show CLS)
Five main scenarios trigger CLS status. Understanding which applies to you determines your next move.
You Paid Off and Closed the Account
This is the good version of CLS. You finished paying an auto loan, personal loan, or mortgage. Or you paid off a credit card and decided to close it.
What this looks like:
- Auto loan: Paid all 60 months, loan naturally closes
- Credit card: Paid to zero, you called to close the account
- Personal loan: Made final payment, lender closed it automatically
Impact on your credit: Minimal. If the account had good payment history, it actually helps your credit for up to 10 years before falling off your report.
The Creditor Closed Your Account
This is where CLS becomes problematic. The lender shut down your account, usually for one of these reasons:
Inactivity: You didn't use your credit card for 12+ months. Banks close inactive accounts to reduce their risk exposure and administrative costs.
Risk management: You maxed out your limit and stayed there. Or you started missing payments on other accounts. The creditor saw trouble coming and closed your account preemptively.
Policy changes: The bank eliminated certain card products. They closed all accounts in that category, even accounts in good standing.
Delinquency: You fell behind on payments. After 90-180 days of non-payment, creditors often close accounts to prevent additional charges.
Impact on your credit: Can drop your score 20-50 points, especially if closed due to delinquency or maxed-out balances. Future lenders see that a creditor didn't trust you.
Account Closed After Collections or Charge-Off
You had a debt that went unpaid. It got charged off (creditor gave up collecting) or sent to collections. Eventually you paid something, either the full amount or a settlement. The account now shows CLS.
Example:
- Original credit card debt: $5,000
- Account charged off after 6 months non-payment
- Sent to collections agency
- You negotiated settlement: $2,500
- Account shows: CLS with "Settled for less than owed"
Impact on your credit: The CLS isn't the problem, the charge-off or collection already tanked your score by 100+ points. The closed status just confirms the account is resolved. This stays on your report for 7 years from the date of first delinquency.
Joint Account or Authorized User Account Closed
Someone else controlled the account. They closed it. You see CLS on your report even though you didn't make the decision.
Common scenarios:
- Parent added you as authorized user on their credit card
- You were joint account holder on a car loan with spouse or partner
- Business card where you were an employee card holder
Impact on your credit: Depends entirely on that account's history. If it was helping your score (long history, perfect payments), losing it hurts. If it had problems (late payments, high balances), you're better off.
Bankruptcy Discharge
Accounts included in Chapter 7 or Chapter 13 bankruptcy show as CLS after discharge.
What you'll see:
- CLS status
- "Discharged in bankruptcy" or "Included in bankruptcy" notation
- $0 balance (debt was eliminated)
Impact on your credit: The bankruptcy already dropped your score 150-250 points. The CLS codes are just documentation. These stay on your report for 7 years (Chapter 13) or 10 years (Chapter 7).
How CLS Affects Your Credit Score
Here's where CLS gets tricky. The impact varies dramatically based on your specific situation.
When CLS Hurts Your Score
Scenario 1: You closed a credit card with available credit
This increases your credit utilization ratio, how much credit you're using compared to your total available credit.
Before closing:
- Card 1: $3,000 balance / $10,000 limit
- Card 2: $0 balance / $5,000 limit
- Total utilization: $3,000 / $15,000 = 20%
After closing Card 2:
- Card 1: $3,000 balance / $10,000 limit
- Card 2: CLOSED
- Total utilization: $3,000 / $10,000 = 30%
Your utilization jumped from 20% to 30%, crossing the threshold where scores start dropping. This can cost you 10-30 points.
Scenario 2: Creditor closed your account
Lenders see "Closed by creditor" and wonder why. Even if your payment history was perfect, creditor-initiated closures raise red flags. Underwriters assume the bank knew something they don't.
Scenario 3: Multiple accounts show CLS in a short period
Three or more closed accounts within 12 months signals instability. Lenders worry you're in financial trouble, even if you voluntarily closed accounts to simplify your finances.
When CLS Barely Affects Your Score
Scenario 1: You paid off an installment loan naturally
Auto loans, mortgages, and personal loans are meant to close when paid off. This is expected and normal. Your score might dip 5-10 points temporarily but recovers quickly.
Scenario 2: You have plenty of other active accounts
If you close one credit card but have five others with strong payment history, the impact is minimal. You maintain good credit mix and utilization.
Scenario 3: The account was very new
Closing an account you opened 6 months ago doesn't hurt much. It wasn't helping your average account age significantly anyway.
When CLS Actually Helps Your Score
Scenario 1: The account had negative history
If you were an authorized user on someone else's card and they missed payments, getting that account closed and off your report (eventually) is good for you.
Scenario 2: You closed a problem account
You had a high-interest card you kept maxing out. Closing it prevents future mistakes and forces you to work with cards you can manage.
What You Should Do About CLS on Your Report
Here's my step-by-step approach for handling closed accounts.
Step 1: Pull All Three Credit Reports
Don't assume all three bureaus (Equifax, Experian, TransUnion) show the same information. They often don't.
Go to AnnualCreditReport.com, the only official site for free reports. Pull all three at once.
Step 2: Find Every CLS Code
Go through each report and list every account showing CLS status. Create a simple spreadsheet:
- Creditor name
- Account number (last 4 digits)
- Date closed
- Who closed it (you or creditor)
- Final balance
- Any negative notations
This gives you a complete picture of all closed accounts.
Step 3: Verify Accuracy
Check each CLS entry against your records. Look for these common errors:
Wrong closure date: Shows closed in January 2023 but you closed it in June 2023. This matters because it affects how long the account appears on your report.
Wrong party closing: Shows "Closed by creditor" when you actually closed it. This makes you look riskier to lenders.
Incorrect balance: Shows $500 balance when you paid it to zero. This suggests unpaid debt.
Wrong payment history: Shows late payments that never happened. This compounds the negative impact.
Account you don't recognize: Could be fraud or mixed credit file with someone who has a similar name.
Step 4: Dispute Any Errors
If you find inaccuracies, file disputes immediately with all three bureaus showing the error.
Your dispute letter should include:
- Your full name, address, and Social Security number
- Specific account details (creditor name, account number)
- Exact error you're disputing
- Correct information
- Supporting documents
Send supporting documents like:
- Final billing statement showing $0 balance
- Letter from creditor confirming you closed the account
- Payment confirmation for final payment
- Email correspondence about closure
Send disputes via certified mail with return receipt. Keep copies of everything.
Bureaus must investigate within 30 days. They'll contact the creditor to verify information. If the creditor can't verify their version, the bureau must correct or remove the entry.
This process costs:
- Your time: 2-4 hours gathering documents and writing letters
- Certified mail: $5-10 per bureau
- Total: $15-30 and one afternoon
But it can save you:
- 20-50 points on your credit score
- 0.25-0.5% lower interest rate on future loans
- $3,000-$8,000 over the life of a mortgage
Step 5: Decide If You Need to Take Action
Not every CLS code requires action. Use this decision tree:
If information is accurate AND account closed in good standing: Do nothing. The CLS is fine.
If information is accurate BUT creditor closed the account: Focus on improving other areas of your credit. You can't change this, but you can offset it with positive activity.
If the account closed after collections: Make sure any settlement agreement is honored. Verify the balance shows correctly. Request deletion if creditor agreed to "pay for delete."
If you closed a card and your utilization spiked: Consider asking the creditor to reopen it (if closed recently) or opening a new card to restore available credit.
Understanding Who Closed Your Account
The single most important detail about any CLS code is who initiated the closure.
How to Tell From Your Credit Report
Most reports explicitly state this. Look for:
- "Closed by consumer"
- "Closed by grantor" (grantor = creditor)
- "Account closed at consumer's request"
- "Account closed by credit grantor"
If you don't see this information, call the creditor directly and ask. Get their response in writing.
Why This Matters to Lenders
When underwriters review your credit application, they see account status codes. Here's what they think:
"Closed by consumer": Neutral to slightly positive. Shows you manage your accounts actively. No red flags unless you closed many accounts recently.
"Closed by creditor": Yellow flag to red flag. They ask: "Why didn't the creditor want this person's business anymore?" Even if the reason was innocent (inactivity), it raises questions.
"Closed by creditor - delinquency": Major red flag. Clear signal of payment problems. Can disqualify you from prime lending products.
Common CLS Situations and What They Mean
Let me walk you through real scenarios I see constantly.
Situation 1: Store Card You Forgot About
You opened a department store card for the 15% discount. Used it once. Never again. Two years later, it shows CLS - closed by creditor due to inactivity.
What this means: Minor negative impact. The creditor closed an unused account. Lenders understand this happens. Unless you have multiple inactive-closure accounts, this won't significantly hurt you.
What to do: Nothing, unless it's inaccurate. Focus on keeping your active accounts in good standing.
Situation 2: Paid Off Car Loan
You made your final car payment. The loan shows CLS with $0 balance and perfect payment history.
What this means: This is exactly what's supposed to happen. Installment loans close when paid off. This actually helps your credit by showing you successfully completed a loan obligation.
What to do: Nothing. This is positive information that stays on your report for 10 years, helping your score.
Situation 3: Credit Card Closed After Maxing Out
You had a $3,000 limit card. You charged $2,950 and could only make minimum payments for 6 months. The creditor closed the account while you still owed money.
What this means: Serious negative impact. The creditor saw risk and cut you off. The account shows CLS with high utilization at closure. This can drop your score 40-60 points.
What to do: Pay down the balance aggressively. The account will still show CLS, but getting the balance to zero helps. Focus on perfect payment history on all other accounts to rebuild trust with lenders.
Situation 4: Collection Account Paid and Closed
You had a $4,000 credit card debt go to collections. You negotiated a $2,000 settlement. Account shows CLS with "Settled for less than owed."
What this means: The collection and settlement already damaged your score heavily (100-150 points). The CLS just confirms it's resolved. This stays on your report for 7 years from your first missed payment.
Recommended Read: Why is Alorica Inc. Calling Me About a Debt I Don't Know
What to do: Document that the debt is settled. If you negotiated "pay for delete," follow up to ensure the entry is removed as promised. Otherwise, focus on building new positive credit history.
Situation 5: Authorized User Card Removed
Your parent added you as authorized user on their card when you were in college. Five years later, they closed the card. Your report shows CLS.
What this means: You lose the benefit of that account's age and payment history. If it was helping your score significantly, you'll see a 15-30 point drop. If you have your own strong credit history now, minimal impact.
What to do: If you don't have much other credit history, consider asking them to add you to a different card. If you have strong credit independently, this closure probably won't hurt you long-term.
When CLS Requires Professional Help
Most CLS situations you can handle yourself. But some need expert assistance.
Get professional help if:
- You see multiple CLS codes with derogatory notations (charge-offs, collections)
- Disputes keep getting rejected without a valid reason
- You're applying for a mortgage soon and need to optimize your credit quickly
- You suspect identity theft or mixed credit files
- The closed account is dragging your score down 50+ points
Your options:
Credit counseling (nonprofit): $0-50, provides education and dispute help. Best for most situations.
Credit repair companies: $50-150/month, handles disputes for you.
Consumer law attorney: Typically no upfront cost if the bureau or creditor violated FCRA laws. They collect fees from the defendant if you win. Best for serious violations like ignoring disputes or continuing to report false information after correction.
The Bottom Line on CLS Codes
CLS means closed. That's it.
But the impact on your credit depends on who closed it, why they closed it, and what your overall credit profile looks like.
Most CLS codes are neutral to slightly negative. They document normal credit account lifecycle, loans paid off, cards closed, accounts settled.
The problematic CLS codes involve creditor-initiated closures due to risk factors, delinquency, or unpaid debt. These signal trouble to future lenders.
Your action plan is simple:
- Check all three credit reports for CLS codes
- Verify each one is accurate
- Dispute any errors with documentation
- Manage your remaining accounts responsibly
- Build new positive credit history to offset old negatives
Understanding your credit report isn't optional anymore. These codes directly impact the interest rates you pay, the loans you qualify for, and the financial opportunities available to you.
Start by pulling your reports today. Find your CLS codes. Make sure they're accurate. That's the foundation for everything else.