Why Do I Have a Derogatory Mark on My Credit Report?

Have you ever heard of derogatory marks on a credit report? It might sound alarming if you’re not familiar with what it means or how it can impact you.

Chances are, at some point, we’ve all experienced something similar. Maybe we forgot to pay our credit card bill, or tough financial times made it tough to cover all our expenses on time.

Knowing what derogatory marks are and how they influence credit scores is important for anyone aiming to handle their finances well.

What are Derogatory Marks?

Derogatory marks are negative, long-lasting indications on your credit reports that generally mean you didn’t pay back a loan as agreed.

For example, late payment or bankruptcy appears on your reports as a derogatory mark. They stay on your credit card for up to 7 or 10 years and damage your scores.

If you have a lower score coupled with a derogatory mark, you may have a hard time getting approved for credit or may get less-than-ideal credit terms.

But the good news is that the impact on your credit of all derogatory marks decreases over time.

Types of Derogatory Marks

Here’s how long various negative marks stay on your credit report:

1. Missed Payments

If you are at least 30 days late, expect a mark on your credit record.

Missed payments stay on your credit reports for seven years. The later the payment, the greater the damage to your credit scores.

2. Account Charge-off

If you don’t pay your debt as agreed, your lender may eventually give up and charge the account.

The charge-off will appear on your credit reports for seven years.

3. Repossession

If you don’t pay for an item, such as a car, as agreed, the lender can come and get it, often without warning.

Repossession will stay on your credit reports for seven years after the account was first reported late.

4. Collections

A creditor who’s not seeing payment may send or sell the debt to a debt collector.

Having an account in collections is a serious negative that stays on your credit reports for seven years.

5. Student Loan Delinquency or Default

If you’re late on paying back your student loans, it can impact your credit score pretty quickly.

For private student loans, missing payments for just 30 days can start causing problems, while for federal student loans, it’s around 90 days.

These late payments stick around on your credit report for seven years.

6. Bankruptcy

How long a personal bankruptcy stays on your credit reports depends on which type you file.

A Chapter 7 bankruptcy will stay on your reports for 10 years. Chapter 13 bankruptcy sticks around for seven years.

7. Foreclosure

If you can’t keep up with your home payments and the bank takes it back, it gets reported to the credit bureaus.

That mark sticks around on your credit reports for seven years.

How Do You Deal with Derogatory Marks

If you’re unaware of a derogatory mark, you can’t address it. Here’s what you can do if you find one on your credit reports.

1. Review Your Credit Reports

Your credit reports might display both “closed” and “open” derogatory marks.

“Closed” derogatory marks pertain to negative items related to accounts that are no longer active, like those in collections or accounts that have been charged off.

On the other hand, “open” derogatory marks indicate negative information about accounts that are still active, such as your current credit cards or loans.

It’s essential to ensure that all the details on your reports are correct, including personal information, both open and closed accounts, as well as any negative information.

2. Dispute Incorrect Derogatory Marks

If there’s a mistake on your TransUnion credit report, you can use Credit Karma’s Direct Dispute tool for free to file a dispute.

The credit bureaus have to look into disputes about trade lines within 30 days of when you file.

3. Start Healing Your Credit

Even if the negative mark on your credit report is valid, you can still make progress in boosting your credit.

Start by making payments on any overdue accounts, and then make sure to consistently pay at least the minimum amount on time.

Try to keep your account balances low and only apply for new credit when necessary.

Don’t brush off the issue. Ignoring certain debts, like tax liens, could lead to more serious consequences such as wage garnishment.

4. Wait for the Marks to Fall off Your Reports

Sometimes, you just have to wait it out. Thankfully, after about two years of having a negative mark on your credit reports, your credit should start getting better.

One way to build credit is by getting a secured credit card, designed to help folks in that situation.

When there’s a negative mark on your credit report, it sticks around for a while and can hurt your credit scores. But you can take steps to improve your credit health.

Keep an eye on your credit reports, challenge any mistakes you find, work on rebuilding your credit, and then let time do its thing with those negative marks.

Negative items on credit reports, also derogatory marks, can cause credit scores to decrease. Over time, their impact may lessen. 

However, rebuilding credit requires consistent and responsible use of credit. Monitoring progress can be done by regularly checking credit reports and scores.