Any sort of negative information about your credit appears as a derogatory mark on your credit report. In some cases it may be possible to dispute the derogatory mark and start fixing your credit and raising your credit score. In other cases it is just a matter of patience, as some marks can stay on your credit reports for quite a long time.
What is a Derogatory Mark?
First, understand that a credit report is a history of all of your credit behavior. Lenders use this history in order to determine how secure it would be to lend you money.
Financial institutions leave what are essentially notes for other lenders on your credit history to alert them of your credit behaviors.
A derogatory mark is like a flag for lenders. It is a negative mark that creditors add to your credit report which means you made a mistake in the past, such as not paying back a loan as agreed or making late payments.
Each derogatory mark counts against your credit score and makes you less creditworthy. If lenders see too many derogatory marks, they may assume you are not financially secure enough to handle lending. In other cases they may offer a more expensive service, in the form of higher interest rates or loan origination fees, to counteract the risk of you not paying.
Types of Derogatory Marks
Late payments – a late payment that is overdue by more than 30 days will put a derogatory mark on your credit.
Debts sent to collections – Failing to pay your debts may get them sold to collections. If debts are sent to collection agencies, a new derogatory mark may be placed on your account.
Defaults – A defaulted loan typically occurs after 120 to 180 days of nonpayment. At this point it will usually be listed as a derogatory mark on your credit report.
Tax liens – Liens the government puts on your property from not paying taxes will go on your credit report.
Foreclosure or repossession – Foreclosures on a home or vehicle you owned will typically appear as derogatory marks.
Bankruptcies – Bankruptcies will be listed on your credit report if you have declared bankruptcy in the past 7-10 years.
Civil judgments – Civil lawsuits brought against you that result in you owing money to the other party become marks on your credit.
Can you Fix a Derogatory Mark?
If you are looking to repair your credit from past mistakes, derogatory marks can be a big pain. The marks can last years, and may feel like they never go away.
There is good news however.
Some derogatory credit marks age, affecting your credit less with time. For instance a similar late payment from 3 years ago will not affect your credit as much as a late payment from last month.
Credit reporting agencies are also required to remove most derogatory marks after 7 years. Bankruptcies last a little bit longer, but even they have to be removed after 10 years.
Disputing a Derogatory Mark
Sometimes credit reporting agencies can forget to close derogatory marks on your account after the set time. In these cases, you can file a dispute for these marks and have them removed.
Get a copy of your credit report if you suspect there are errors in your credit score.
Comb through your credit report very thoroughly, checking for several different issues:
Ensure that all your personal information is correct
Note which accounts you have on the report, including both open and closed accounts
Check for delinquent payments under your accounts and compare them to your records
Check for accounts in collections
Check the age of all possible derogatory marks, ensuring that none are past 7 years
If you find an incorrect derogatory mark, you can file a dispute to have it removed. Credit bureaus are required to investigate most disputes within 30 days.
Not all derogatory marks are errors. Most of the time, derogatory marks are simply reminders of mistakes you have made with your credit in the past. While it may seem difficult, it is also not a life sentence. Take the steps to start healing your credit and make derogatory marks on your credit reports a thing of the past.