Key Takeaway: A derogatory mark, like a late payment or bankruptcy, indicates that you didn’t meet an obligation to repay a loan, credit card or other debt. Certain marks can remain on your credit reports for up to 10 years, but the impact they have on your credit scores decreases over time.
Derogatory marks appear when creditors or lenders report negative information about your payment history to the credit bureaus or the credit bureaus add public records about unpaid debts to your reports. They include items such as late payments, bankruptcies, foreclosures and repossessions.
These marks can negatively affect your credit scores, but they’ll typically only stay on your credit reports for up to 10 years. Here are the types of derogatory marks that may show up on your credit reports, how long they stay and what you can do to improve your credit.
- What is a derogatory mark on your credit?
- What types of derogatory marks can show up on your credit reports?
- How long do derogatory marks stay on your credit reports?
- How do derogatory marks affect my credit scores?
- Can you remove a derogatory mark from a credit report?
- Next steps: Improving your credit
- FAQs about derogatory marks on your credit
What is a derogatory mark on your credit?
Derogatory marks show that you didn’t repay a debt as agreed. Having one or more on your credit reports doesn’t mean your credit is irreparable, but it may have real-life consequences, at least temporarily, while you work to rebuild your credit. Depending on the type of mark, they may be visible to …
- Lenders — Lenders run credit checks to help them determine the likelihood that you’ll repay what you owe on time. You’ll probably have a more difficult time getting approved for a loan or credit card and qualifying for a low rate if you have derogatory marks on your credit reports.
- Landlords — Landlords run credit checks to assess whether you’ll pay your rent on time. If your credit history includes negative marks, it may be more difficult to get your rental application approved. Your landlord may also require you to pay a higher security deposit to offset the added risk.
- Employers — Employers may run a credit check as part of a pre-employment background screening and can use information in your credit report as a reason to deny a job offer. If you’re turned down for a job because of information that appears during a credit check, the Fair Credit Reporting Act requires employers to tell you.
What types of derogatory marks can show up on your credit reports?
Multiple events can result in a derogatory mark appearing on your credit reports. Here’s a brief overview of each.
| Derogatory mark | What it means |
|---|---|
| Late payment | This is a payment that’s at least 30 days past due. Late payments may appear as 30, 60 90 or even 120 days delinquent. The more severe the delinquency, the greater the impact to your credit. |
| Collections account or charge-off | When a creditor gives up trying to collect a debt, usually between the 120 and 180-day mark, it can “charge off” the account and send it to and in-house or third-party collections agency. The account is closed, and the collections company will try to get a payment from the borrower. |
| Bankruptcy | Bankruptcy is a legal proceeding that provides relief from certain debt obligations. Not all types of debt are dischargeable during this proceeding, and you may not be eligible for certain types of bankruptcy. |
| Debt settlement | You and a creditor reach an agreement that requires you to repay only a portion of what you owe. |
| Repossession | If you don’t make your auto loan payments, your lender can repossess your vehicle and sell it to recoup its losses. Depending on where you live, they may be able to take possession of your car as soon as you miss a payment. |
| Foreclosure | This process occurs when the lender takes possession of your house to sell it and recoup what you owe on your unpaid mortgage. Depending on your contract and state, this type of proceeding can occur with or without judicial approval. |
How long do derogatory marks stay on your credit reports?
Negative marks eventually fall off your credit reports. Here’s how long different types of derogatory information may remain.
| Derogatory mark | Time on credit reports |
|---|---|
| Late payment | 7 years |
| Collections account or charge-off | 7 years |
| Bankruptcy | 10 years |
| Debt settlement | 7 years |
| Repossession | 7 years |
| Foreclosure | 7 years |
FAST FACTS
Are there situations when negative information can be reported after the time limit expires?
Your credit reports may reflect negative information after the time limit expires if a potential employer pulls your credit report because they may offer you a job with an annual salary above $75,000. This is also true if you’re applying for more than $150,000 of credit or life insurance.
How do derogatory marks affect my credit scores?
New derogatory marks generally decrease your credit scores and typically affect higher scores more than lower scores. But you have many different credit scores, and each scoring model weighs derogatory marks differently, so they may not affect all of your scores equally. For example, some newer models don’t include paid collection accounts or unpaid medical accounts in their calculations.
Credit scoring models tend to use the same five general factors to calculate your credit scores. Here’s how derogatory marks may affect each of those factors.
- Payment history: Your payment history has the biggest effect on your scores. If you have late or missed payments on your credit report, these will negatively impact your payment history.
- Credit utilization: Missed payments could also mean that your credit utilization, or the amount you owe compared to your total available credit limit, will rise. Having high credit utilization could cause your scores to decrease.
- Length of credit history: This factor measures the ages of your oldest and newest accounts, as well as the average age of all of your accounts. Derogatory marks that show you have accounts in collections or accounts that have been charged off could affect the age of your accounts.
- Credit mix: If an account reaches a point where the lender charges it off, it can also affect the mix of active accounts you have.
- Recent credit activity: This category measures whether you’ve applied to or opened new credit accounts. Derogatory marks can’t keep you from applying for new credit, but they can make it much harder to get approved.
Can you remove a derogatory mark from a credit report?
If the derogatory mark is accurate, you probably won’t be able to remove it from your credit report until it’s ready to fall off.
You can consider writing a goodwill letter to the creditor asking them to remove it, especially if you have just one negative mark in an otherwise stellar credit history. But writing a goodwill letter isn’t a tactic recognized by the Federal Trade Commission or Consumer Finance Protection Bureau.
Creditors are legally required to maintain complete and accurate credit information. Because you’re asking to have accurate information removed, the chances of success are slim. Lenders don’t have to consider or respond to your goodwill letter request.
If the derogatory mark isn’t accurate, you can dispute the error with the credit bureau attached to the report. The bureau will generally have 30 days to investigate the disputed information. If the investigation shows there’s an error on your report, the bureau must remove it.
Beware of credit repair scams
If someone says they can remove negative information from your credit reports for a fee, be wary. It’s probably a scam. Credit repair companies can’t remove accurate information from your reports, and you can dispute inaccurate information yourself for free.
Next steps: Improving your credit
If there are errors on your credit report, your top priority should be to address them. But if the information on your credit reports is accurate, focus on habits that will improve your credit and avoid situations that could lead to derogatory marks, like missing your payments.
You can take steps right away to improve your credit, including …
- Getting your past-due accounts current to avoid adding derogatory marks to your reports
- Making on-time payments every month to begin rebuilding your positive payment history
- Keeping revolving account balances low to minimize your credit utilization
It takes time, patience and consistent positive habits for your scores to improve. To help you track your progress, be sure to check your credit reports and scores routinely. You can use Credit Karma to get free credit reports, as well as free VantageScore 3.0 credit scores, from TransUnion and Equifax, two of the three major credit bureaus.
FAQs about derogatory marks on your credit
Yes, you should generally pay off your derogatory account if you can afford to do so. Lenders often view paid charge-off accounts more positively than unpaid accounts. In some cases, paid collection accounts aren’t factored into your credit scores at all, which may limit the damage to your scores.
If the late payment is an error, you can dispute it with the credit bureaus and request that they remove it. You generally can’t remove late payments from your credit reports if the information is accurate. You might consider writing a goodwill letter to the creditor, but you’ll likely have to wait until the information falls off your credit report.
Derogatory marks fall off your credit reports at the end of the reporting period, which ranges from seven to 10 years, depending on the type of mark you have. If the negative information is inaccurate, you can dispute the error with the credit bureaus to have it removed right away.
Even a single derogatory mark can negatively affect your credit, but the impact will decrease over time if you maintain positive credit-building habits. Derogatory marks typically affect higher scores more than lower scores. Minor marks, such as a single 30-day late payment, generally cause less damage than more severe marks, such as a foreclosure.