What Does "Potentially Negative Closed" on a Credit Report Mean?

Missing a few payments can haunt you for the better part of the decade and cost you a loan, even if the rest of your credit record is spotless. You can tell you mishandled a loan or line of credit at some point during its lifetime, because it might say something in the vein of "potentially negative, closed."

Identification

An account with the status "potentially negative, closed" means the account is paid off or no longer active and had at least one negative item associated with it in the past, such as a late payment. Closed accounts are almost always a revolving loan, such as a credit card. An installment loan, such as a mortgage, would have the status "paid."

Features

An account that has been closed can no longer be used for transactions. Credit reports do not differentiate whether the borrower or lender initiated the closing, so a negative account always looks bad to future creditors. The main body of the credit report details the account history and what caused the agency to list the account as potentially negative. Some credit reporting agencies use alphanumeric codes to report an account that was previously negative. Equifax, for example, uses "I9" or "R9" for accounts that default and go to a collection agency.

Time Frame

Once you have an incident on your account, the credit agency reports it as potentially negative for seven years, unless it involves a bankruptcy, then it stays as a negative account for 10 years. Accounts that go to a collections agency can stay on a credit report for as long as a state's statute of limitations allows. Any account that has a negative item is considered "potentially negative" by the credit bureaus. The bureaus say "potentially negative" because they do not make judgments about anything on report, but do suggest items that might concern a creditor.

Tip

Review any potentially negative accounts for accuracy. Credit agencies handle billions of pieces of data each day, so mistakes are not uncommon. Once you initiate a dispute, the credit agency must investigate it within 30 days -- 21 days in the state of Maine, according to Experian.