What is a Derogatory Mark?

If you’re like most of us, then you probably want to keep your credit report looking as great as possible to maintain an excellent credit score. Oftentimes, derogatory marks are added to one’s credit reporting causing significant damage that often lasts for the better part of a decade. So, what exactly is a derogatory mark? We will what a derogatory mark is in much detail below.

What is a Derogatory Mark?

A derogatory mark is a negative mark that is added to your credit report, indicating that you have not repaid an account as agreed or that some negative event has taken place. Some examples of derogatory marks include late payments, charge-offs, bankruptcy, foreclosure, and accounts settled for less than the originally agreed-upon amount. Derogatory marks typically remain on your credit report for seven years from the date of the delinquency. Derogatory marks typically cause significant damage to your credit, dropping your credit score significantly.

Derogatory marks serve as a red flag to potential lenders and creditors who will be accessing your credit report to assess your creditworthiness.

If you have a derogatory mark on your credit report, you may find it difficult to be approved for credit cards and/or loans, especially if you apply within a short period of time after the derogatory mark is added to your credit report.

You may find some lenders who are willing to work with you with a derogatory mark on your account, however, you will likely qualify for less than ideal terms.

That said, the impact a derogatory mark has on your credit score and ability to obtain credit lessens as the derogatory mark ages. The more time that passes, the better for you and your credit score.

Types of Derogatory Marks

Type of Derogatory Mark
What does this mark indicate?
How long will it remain on your credit report?
Late PaymentA late payment mark is added to your credit report whenever your account becomes delinquent for 30, 60, 90, and 120 days. The longer the delinquency, the bigger the drop in your credit score.Late payments will remain on your credit report for 7 years from the date of the delinquency.
Collection AccountIf you're delinquent on making payments on your account, your debt may be sold to a collection agency that will attempt to collect the debt from you by placing a collection account on your credit report.A collection account will remain on your credit report for 7 years from the date you became delinquent on making the original debt payment.
Charge-offIf you don't make payments on your account for a lengthy period of time (usually 180 days), the creditor will charge-off the account, which means they will write it off as a loss. Once this happens, a charge-off notation is added to your credit report indicating this event.A charge-off will remain on your credit report for 7 years from the date you first missed a payment on the account.
BankruptcyBankruptcy is a legal proceeding where you ask for relief from your debt obligations. There are two main types of bankruptcy: Chapter 7 and Chapter 13 bankruptcy. If you file for bankruptcy, a bankruptcy notation will be added to your credit report. Bankruptcy is the worst derogatory mark that can appear on your credit report.A chapter 7 bankruptcy will appear on your credit report for 10 years from the date you filed for bankruptcy. Chapter 13 bankruptcy will appear on your credit report for 7 years from the date you filed for bankruptcy.
ForeclosureA foreclosure is an event that occurs when a person stops making payments on the mortgage for his home. If a foreclosure appears on your credit report, it could cause significant damage to your credit score.A foreclosure will remain on your credit report from the date that you first became delinquent on making payments on your mortgage.
Debt SettlementDebt settlement is a derogatory mark that can appear on your credit report when you and a creditor agree to settle a debt for an amount that is less than the amount originally agreed upon. Debt settlement will last for 7 years on your credit report from the date you first missed a payment on your account or from the date that the debt was settled.
Civil JudgmentA civil judgment is a monetary obligation that you are required to pay when you lose a civil lawsuit.In the past, a civil judgment would remain on your credit report for 7 years from the date the judgment was entered against you. However, recently, the law has changed and civil judgments will no longer appear on your credit report and will, therefore, not impact your credit score.
Tax LienA tax lien is a lien that's placed against you when you fail to pay either your state or federal taxes.In the past, tax liens would appear on your credit report for 7 years from the date of delinquency. However, recently, tax liens were removed from credit reports and therefore they will not impact your credit score.

Now that you know the different types of derogatory marks that can appear on your credit report, you should be aware that they can significantly lower your credit score. Most derogatory marks will remain on your credit report for 7 years from the date you first became delinquent on your account.

How to Find Out If You Have Derogatory Marks on Your Credit Report?

If you have missed a payment on one of your accounts or you have filed for bankruptcy, there is a good chance that a derogatory mark has been added to your credit report. However, to know for sure if a derogatory mark has been added to your credit report, you should request a copy of your credit report. Annualcreditreport.com allows every American to request a free copy of their credit report once a year. So, if you’re worries that a derogatory mark may be dragging your credit score down, you can request a free copy of your credit report using this site.

That said, to know if a derogatory mark is on your credit report, you must check your credit reports from the major credit reporting bureaus (Transunion, Experian, and Equifax). This is so because oftentimes, derogatory information is only added to your credit report with only one of the credit reporting bureaus. This is so because some lenders do not report information to all three credit reporting bureaus, instead, they choose one credit reporting bureau to report to.

Can You Remove a Derogatory Mark From Your Credit Report?

Removing a derogatory mark from your credit report is a difficult task to perform especially if the information report on your credit report is accurate. However, if there are any inaccuracies in the information report to the credit reporting bureaus, you may be able to have it removed by doing of two things.

First, if inaccurate derogatory information appears on your credit report, you can contact the entity reporting the inaccurate information, explain to them that the information they’re reporting is inaccurate, and ask them to remove it from your credit report.

The second option is to file a dispute through the credit reporting bureau reporting the inaccurate derogatory information. For example, if you pull a copy of your Experian Credit Report and you find a collection account that does not belong to your on your credit report, you can file a dispute through them, asking them to remove the account because it does not belong to you.

After filing a dispute, the credit reporting bureau will conduct an investigation to determine whether any inaccuracies exist. If the investigation reveals that the information is inaccurate, they will remove the information from your credit report. If they find that the information is legitimate and error-free, the information will remain on your credit report.

The third option is to contact a credit repair service and ask them to assist you with the removal of the derogatory information. Credit repair services have the knowledge to assist you with the removal of derogatory information.

More Ways to Improve Your Credit Score

  1. Make your payments on time – Your payment history accounts for 35% of your credit score, so making full on-time payments will significantly improve your credit score, especially if you’re starting with a poor credit score.

  2. Reduce your balances – Your credit utilization accounts for 30% of your credit score, so if you want to improve your credit score, you should pay down the balances on your accounts. As a rule of thumb, your credit utilization (how much of your available credit you’re using), should not exceed 30% of your available credit. If your credit utilization exceeds 30%, your high credit utilization will end up hurting your credit score. The lower your credit utilization, the more this factor will help your credit score.

  3. Keep old accounts open – We understand that closing down old accounts that you don’t use may be tempting, but if you have an old account and you’ve made all your payments on time, you should leave such an account open because it will boost your average account age, which accounts for 15% of your credit score. You want to keep old accounts open to increase the overall age of your accounts. Doing so will improve your credit score.

  4. Improve your mix of credit – Your credit score depends in part on having a diverse credit profile, so having different types of accounts, such as credit cards, auto loans, home mortgage, and student loans will help your credit score. This is so because the credit reporting bureaus want to see how you handle different types of debt. As such, the more diverse your accounts, the more this factor will improve your credit score.

  5. Don’t apply for too many new accounts – To improve your credit score, you should refrain from applying for too many credit cards and loans. This is so because every time you apply for such accounts, a hard inquiry is placed on your credit report. Although a single hard inquiry will only lower your credit score by a few points, submitting too many applications within a short period of time could cause significant damage to your credit so. So, only apply for the accounts that you need.

  6. Periodically check your credit report – If you’re not already in the habit of check your credit report, you should periodically check your credit report, and if you notice any inaccuracies on your report, you should immediately dispute them to have them removed from your credit report.

Credit Score Planet Frequently Asked Questions

1. Can a derogatory mark be removed from your credit?

A derogatory mark can only be removed from your credit report if it contains inaccurate information. Removing a valid derogatory mark is a difficult task. For more information, you should contact a credit repair service and ask them about the possibility of removing a derogatory mark from your credit report.

2. How do I remove a derogatory mark from my credit report?

You may be able to remove a derogatory mark from your credit report by either asking the party that added the derogatory mark to remove it or you can file a dispute through the credit reporting bureau displaying the derogatory mark.

3. How long does a derogatory mark stay on my credit report?

Most derogatory marks will stay on your credit report for 7 years.

4. Can you buy a house with a derogatory mark on your credit report?

Yes, you may be able to buy a house with a derogatory mark on your credit report. For the best answer, you should contact a licensed financial adviser in your jurisdiction about purchasing a home with the type of derogatory mark that’s on your credit report.