.png)
Understanding and Addressing Derogatory Marks on Your Credit Report
- Darrin Singer Jr
- Mar 15, 2023
- 5 min read
Informational By: Darrin Singer Jr
What are Derogatory Marks?
Have you ever wondered how certain financial missteps can impact your credit score? In this blog, we'll be diving deep into the subject of derogatory marks. These pesky blemishes can greatly impact your credit score and, in turn, your financial well-being. Understanding the different types of derogatory marks, how they occur, and how long they stay on your credit report can empower you to take control of your credit and make more informed financial decisions.
Common Types of Derogatory Marks
There are several types of derogatory marks that can appear on your credit report:
Each of these marks has a different impact on your credit score, depending on the severity and recency of the event.
How Derogatory Marks Impact Your Credit Score
Derogatory marks can significantly damage your credit score, as they signal to lenders that you may not be a responsible borrower. The impact of these marks depends on several factors, such as the type of derogatory mark, the amount of time that has passed since the negative event, and your overall credit history. Generally, the more severe and recent the mark, the greater its impact on your credit score.
According to Experian, one of the major credit reporting agencies, a single late payment can cause your credit score to drop by as much as 100 points, depending on your initial credit score and the length of the delinquency. A 2019 report from Experian found that around 34% of Americans had at least one late payment on their credit report .
Charge-offs can result in significant credit score drops, as they indicate that a lender has given up on collecting a debt due to non-payment. The Consumer Financial Protection Bureau (CFPB) reported that 15.9% of consumers had a charged-off account in 2017.
Collections negatively impact your credit score, as they represent a debt that has been turned over to a collection agency. The Federal Reserve Bank of New York found that 33.5% of Americans with a credit report had a collection account in 2018.
Bankruptcies can cause a significant drop in your credit score. The American Bankruptcy Institute reported that there were 544,463 bankruptcy filings in the United States in 2020 [5]. While the percentage of Americans with a bankruptcy on their credit report isn't readily available, bankruptcies are known to significantly impact credit scores.
Foreclosures can also negatively affect your credit score. According to Attom data, foreclosure filings in 2022 represented 0.23 percent of all U.S. housing units, up slightly from 0.11 percent in 2021. This figure represents a small percentage of homeowners, but it's important to note that the impact of foreclosure on credit scores can be substantial.
Repossessions occur when a lender takes back property due to non-payment of a loan. While the exact percentage of Americans with a repossession on their credit report isn't available, repossessions can lead to significant credit score drops.
Dealing with Derogatory Marks on Your Credit Report
Identifying Derogatory Marks on Your Credit Report
The first step in addressing derogatory marks is to obtain a copy of your credit report from each of the three major credit bureaus (Experian, Equifax, and TransUnion). You are entitled to one free credit report from each bureau every 12 months. Review your reports carefully to identify any derogatory marks that may be present.
Verifying the Accuracy of Derogatory Marks
Once you have identified any derogatory marks on your credit report, it's essential to verify their accuracy. Errors and inaccuracies can sometimes occur, so be sure to double-check the information against your own records. If you find any discrepancies, gather any relevant documentation to support your claim.
Disputing Inaccurate Derogatory Marks
If you discover inaccurate derogatory marks on your credit report, you have the right to dispute them. To do so, you'll need to submit a dispute to the appropriate credit bureau, providing any supporting documentation. The credit bureau is then required to investigate your claim and remove any inaccuracies from your credit report. This process can take up to 30 days, so it's important to be patient and diligent in following up with the credit bureau.
Seeking Professional Help
If you're struggling to navigate the process of disputing derogatory marks or need assistance with managing your credit, consider seeking help from a reputable credit repair company, such as Total Credit Care Agency. These professionals can provide guidance and support, helping you address any inaccuracies and improve your credit score.
Moving Forward After Derogatory Marks
Rebuilding Your Credit Score
Once you have addressed any derogatory marks on your credit report, it's time to focus on rebuilding your credit score. This process involves adopting responsible financial habits, such as paying bills on time, maintaining low credit card balances, and avoiding applying for multiple credit accounts within a short period.
Establishing Good Credit Habits
Building a strong credit history involves establishing good credit habits. Some strategies to consider include:
Understanding the Timeframe for Derogatory Marks to Expire
It's essential to know that derogatory marks won't stay on your credit report forever. Depending on the type of mark, they can remain on your report for a specific period before they are automatically removed:
Understanding these timeframes can help you develop a plan for improving your credit score and provide a sense of relief, knowing that negative marks will eventually be removed from your report.
Conclusion
Dealing with derogatory marks on your credit report can be overwhelming, but understanding the types of marks, their impact on your credit score, and the steps to address them can significantly improve your financial health. By verifying the accuracy of derogatory marks, disputing inaccuracies, seeking professional help, and adopting good credit habits, you can rebuild your credit score and secure a brighter financial future.
Frequently Asked Questions
How do I obtain a free credit report? You can request a free credit report from each of the three major credit bureaus (Experian, Equifax, and TransUnion) once every 12 months through AnnualCreditReport.com.
How long does it take for a derogatory mark to be removed after disputing it? Credit bureaus typically have up to 30 days to investigate your dispute and remove inaccuracies from your credit report.
Will my credit score improve immediately after a derogatory mark is removed? While the removal of a derogatory mark can positively impact your credit score, the improvement may not be immediate. It depends on various factors, such as your overall credit history and the other items on your report.
Can I remove accurate derogatory marks from my credit report? Accurate derogatory marks cannot be removed from your credit report before the specified expiration period. However, you can work on rebuilding your credit score by adopting responsible financial habits.
How can I prevent derogatory marks from appearing on my credit report? Preventing derogatory marks on your credit report involves practicing good financial habits, such as paying your bills on time, maintaining low credit card balances, and monitoring your credit report regularly for errors or signs of identity theft.
Comments