What are derogatory marks and how can you repair them?
What is a derogatory mark? Derogatory marks on a credit report can signal to the lender that the person in question has failed in some way to make their payments or has been late in paying their bills.
The lender may view this person as a poor risk for making payments in the future and may deny them credit or charge an excessively high interest rate.
Several kinds of negative marks can be listed on your credit reports; each type can impact your credit score to a different degree and length of time.
Some common derogatory marks are late payments, charge-offs, foreclosures, and bankruptcy.
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How Do Derogatory Marks Impact Your Credit Score?
If you’ve found a derogatory mark on your credit report, it’s safe to say your credit score will be affected.
However, your credit and the type of negative mark both play a role in how badly your credit score will drop.
Individuals with higher credit scores will see a more significant drop versus someone with an already low credit score.
Plus, negative marks such as bankruptcy or foreclosure will have a greater impact than a posted late payment.
What Causes a Derogatory Mark?
Let’s review the different financial events that can lead to negative marks on your credit report and for how long.
| Types of derogatory marks | What is it, and what’s the impact? | How long will it be on your credit report? |
| An account in collections or a charge-off | Accounts with overdue balances (generally 180 days and more) are sent to collections or marked as a charge-off. | 7 years from the date it’s marked as a charge-off |
| Bankruptcy | Bankruptcy is a legal process that allows you to be absolved of your debts. They may sell your assets, and you might be required to pay back a portion of the debts. | A Chapter 13 bankruptcy can remain on your credit report for seven years. Chapter 7 bankruptcy can remain for 10 years. |
| Civil judgment | A civil judgment is the court’s decision on who wins a lawsuit. When losing a case, any debts can cause the mark to appear on your credit reports. | Paid civil judgment: 7 years from the time the judgment was filed. Unpaid civil judgment: Unpaid judgments can last for 7 years, although they can be renewed when remaining unpaid. |
| Debt settlement | The creditor allows the debtor to settle their debt by paying a lesser amount of the debt owed. | Generally, seven years from the date the debt was settled. If there were missed payments, the waiting period would start from the date of the first overdue payment. |
| Foreclosure | A foreclosure is when the bank repossesses a home because the individual cannot afford their mortgage payments. | Seven years from the foreclosure filing date. |
| Late payments | Payments made 30 days, or more after the payment due date is considered late. | Late payments can remain for seven years after you make a delinquent payment. |
| Repossession | Repossession occurs when your assets are confiscated due to the nonpayment of your debts. | It can be on your credit report for up to seven years from the day the payment was missed. |
| Tax lien | Failure to pay your taxes can lead to the Federal government attempting to collect on the balance by placing a lien on your property. | Effective April 2018, all three major credit bureaus removed tax liens from credit reports. Tax liens no longer impact credit scores. |
How Long Can a Derogatory Mark Impact Your Credit Score?
Derogatory marks can affect your credit for 7 to 10 years; you can, however, take steps to start improving your credit score before the timeframe is up.
Small yet important steps like paying your minimum payments and managing your credit utilization can help rebuild your score.
How To Improve Your Credit Score With Derogatory Marks on Your Credit Report?
While derogatory marks impact your credit score, you can always work towards repairing your credit; every little bit helps.
Let’s review some steps you can take for each type of derogatory mark to improve your credit score.
| Derogatory Mark | Tips for improving your credit score |
| An account in collections or a charge-off | Pay off the debt or negotiate a pay-for-delete agreement. If you can manage to negotiate an agreement that includes the removal of the negative mark from your credit reports in exchange for your payment, you will be one step ahead. |
| Bankruptcy | Rebuilding credit after bankruptcy can be tough. Start by acquiring a credit card targeted for low credit scores, such as the Opensky Secured Visa card or the Petal 1 credit card. Make timely payments to start the rebuilding process. |
| Debt settlement | Pay off the agreed-upon amount by its due date to avoid the account be being passed to collections or marked as a charge-off. |
| Foreclosure | The goal is to re-establish positive credit history by making timely payments on your other credit accounts and loans. |
| Late payment | Pay off any overdue balance as soon as possible and do your best to avoid any future late payments. |
How To Remove Derogatory Marks From Your Credit Report?
Derogatory marks can be removed from your credit reports when you take the necessary steps to dispute any reporting errors with the credit bureaus.
Review your three credit reports
If you have an erroneous derogatory mark on any of your three credit reports, you can file a dispute with each bureau that has posted it.
You want to review all the listed data, including open and closed accounts, your personal information, and any negative listed information.
Be sure to check if all your payments were reported and that the dates are accurate.
Dispute incorrect derogatory marks
If you find negative marks on your Equifax, TransUnion, or Experian credit reports, you can start a dispute or get help from a credit repair professional.
Credit bureaus are required to investigate disputes; they have 30 days to verify the file.
Follow up on the dispute
Always follow up by reviewing your credit reports to ensure any errors were removed.
If you receive any requests for additional information or documentation, make sure you respond by the indicated deadlines.
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About the author
Clara is the founder of Credit Rise Up, an entrepreneur, personal finance expert, and credit repair enthusiast. She’s committed to helping her readers get on the right track and take actionable steps towards improving their credit by using the experience that allowed her to join The 800 Club. Find out more.