What is a derogatory mark?
A derogatory mark is essentially a long-lasting negative record on your credit report. These marks will likely hurt your ability to qualify for credit or obtain desirable rates, and can typically take seven to ten years to clear from your credit history.
Some examples of especially severe derogatory marks include:
- Bankruptcy: This generally means that you have entered into a special legal proceeding to request certain forms of relief from your debt obligations. Because it's a drastic step and one of the most damaging negative records you can have on your credit report, it is usually a last resort for addressing overwhelming debt.
- Foreclosure: This generally relates to situations where you have fallen behind on mortgage loan payments and the lender has undergone a legal process to attempt to force a sale of the home used as collateral for the mortgage loan.
- Collections: These are accounts that have been reported as sent or sold to a third-party debt collector by the original creditor because of missed payments.
- Tax lien: Tax liens may occur when you neglect or fail to pay a tax debt on time. It's important to know that unpaid tax liens may remain on your credit report indefinitely.
- Civil judgment: This information usually relates to civil lawsuits which require the payment of damages (for instance, if you lost a civil case or failed to respond to a lawsuit at all).
What does it mean for my credit?
As the number of derogatory marks you have on your credit report is really important in some credit scoring models, it's best to minimize these marks. Just one derogatory mark can drop your score drastically.
What can I do about derogatory marks on my credit report?
If the derogatory marks on your credit report are accurate, there often isn't much you can do and you should be wary of credit repair companies that claim they can remove this information. The best practice is to keep the rest of your credit in good health and wait for those marks to naturally fall off over time.
As with other erroneous information, if you see a derogatory mark on your credit report that is inaccurate, you can dispute it with the credit bureaus.
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