In some cases, derogatory marks result from credit report errors, and you can dispute them. In other cases, derogatory marks appear after you miss a payment, begin the debt settlement process or take some kind of financial action that suggests you may be a temporary credit risk.
Derogatory marks can have a negative effect on your credit score — and they can also have a negative effect on your state of mind. If you have a derogatory mark on your credit report, you’re probably wondering how it’s going to affect your credit. You may also want to know how long the derogatory mark will remain on your credit report, and if there’s any way to dispute it and rebuild your credit score.
Let’s take a close look at derogatory marks — what they are, how long they last, how they affect your credit and what you can do to dispute them.
What is a derogatory mark?
A derogatory mark appears on your credit report after a negative financial event, like a missed credit card payment. Some derogatory marks are directly related to the way you manage your credit cards and loans.
If your home goes into foreclosure, for example, you can expect a derogatory mark on your credit report. You can also expect derogatory marks to appear if you begin the debt settlement process, since it often involves paying your creditors less than you originally owed. Other derogatory marks are related to bigger-picture financial issues such as tax liens, civil judgments and bankruptcy.
How do derogatory marks affect your credit score?
Most derogatory marks have a negative effect on your credit score. Since 35 percent of your FICO credit score is based on your payment history, for example, a derogatory mark on your credit report for missing a payment can cause your score to plummet.
Different types of derogatory marks have different effects on your credit score. For instance, a late payment can hurt your credit, but not as much as a foreclosure. The more serious the financial issue, the more the mark could damage your credit score.
How do you get a derogatory mark on your credit report?
In many cases, you’ll know exactly why you have a derogatory mark on your credit report. If you begin bankruptcy proceedings, for example, that will be reported to the three major credit bureaus, and you’ll see derogatory marks on each of your three credit reports.
In some cases, you may not know why there’s a derogatory mark on your credit report. If your credit report shows that you missed a payment but you remember making all of your payments on time, for example, you may need to contact your credit card issuer— or dispute the derogatory mark with the credit bureaus.
How can you dispute a derogatory mark on your credit report?
Disputing a derogatory mark is a relatively easy process. Experian, Equifax and TransUnion offer online dispute forms, and, in many cases, you can expect a resolution within 30 days.
If you believe there is an error on your credit report, don’t worry. This happens more often than many people realize. In many cases, credit report errors appear when two creditors have similar names. Errors can also appear when your report includes outdated information such as an old address or phone number. This is why it’s essential to check your credit reports regularly and dispute any errors you find.
How long do derogatory marks remain on your credit report?
Most derogatory marks remain on your credit report for seven years, although a few of the more serious ones could stay on it for up to 10 years. If you dispute a derogatory mark, it will be removed as soon as the dispute is resolved.
You don’t have to wait seven years to start rebuilding your credit after a derogatory mark. Although your credit score is likely to take a hit, you can begin to boost your credit score by making on-time payments, keeping your balances low and avoiding applying for new credit. As time goes by, your derogatory mark is likely to have less of an influence on your credit score — especially if you continue to build a positive credit history.
Derogatory marks can hurt your credit — but not permanently. In some cases, they result from credit report errors that you can successfully dispute. In other cases, these marks appear after you miss a payment, begin the debt settlement process or take some kind of financial action that suggests you may be a temporary credit risk.
Derogatory marks may remain on your credit report for seven to 10 years, but you can rebuild your credit by continuing to practice good financial habits such as making on-time payments and avoiding credit card debt.