What is Derogatory Credit?

What is Derogatory Credit?

If you’re setting your sights on achieving your dream of owning a home, you will want to pay close attention to your credit history and credit score. One mark that potential home buyers may find on their credit report is “derogatory credit.” It is important to understand how your credit score is calculated, and to fix derogatory credit when possible. 

What is Derogatory Credit?

In short, derogatory credit is not good. Not good at all. According to Experian, one of the three major credit reporting agencies, “The term “derogatory” means the information is negative and will likely hurt your ability to qualify for credit or other services.” An account that has been labeled derogatory “is one that is seriously past due. Most commonly, the term derogatory refers to accounts that are 60 or 90 days past due or more. It also includes collection accounts, charge-offs, repossessions and foreclosures. It may also refer to other information that indicates credit risk, such as bankruptcy and public records.”

Derogatory marks on your credit report can hinder your ability to apply for new credit loans or increase your interest rates.

How Do I Get A Derogatory Mark on My Credit Report?

Derogatory marks on your credit report show up when a creditor reports a negative credit incident, like a late payment. However, these marks can sometimes be a mistake, which is one reason why you should keep an eye on your credit report by taking advantage of the ability to get a free credit report once per year. You can obtain your credit report from all three major credit reporting agencies (Experian, Equifax, TransUnion) by logging into a website such as AnnualCreditReport.com.

Can I Remove a Derogatory Mark From My Credit Report?

The good news is that most derogatory marks are removed from your credit report after seven  years. That said, bankruptcies most likely will stay on your credit report for ten years.

If you believe that the derogatory mark on your credit report is there in error, you can file a dispute with the credit agencies and they will have 30 days to investigate the dispute.

In order to improve your credit report, be sure to make your payments on time and pay down your credit card balances.

Having a derogatory credit mark on your credit report is not the end of the world. Over time, by showing that you are responsible with your credit by paying down balances and making on-time payments, you can improve your credit score, which will give you a better chance to secure a home loan to get you into your dream home.

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