Derogatory Marks, what are they and how do they affect your score?

1 minute read

If your score recently dropped, you might have a derogatory mark on your credit report. This can be very frustrating, especially if you are a good borrower. Understanding what led to the score drop will help you take action into improving your score. Here is an overview of derogatory marks and how to correct them:

Types and impact on your score

Top ↑

Derogatory marks are items that impact your score negatively. They come from missed payments in loans and other financial services. Here are the most common ones from high to low impact.

  1. Bankruptcy – This is a legal process that you initiate when looking for relief from debt obligations. It impacts your score up to 240 points and will remain in your credit reports from 7 to 10 years from the filing date (depending on the type of bankruptcy).
  2. Foreclosure – Happens when many missed payments accumulate in a mortgage. It will impact your score up to 160 points and will remain active on your credit report for 7 years from the filing date.
  3. Debt Settlement – This comes when you and your money lender negotiate a deal in which you only pay some part of the total debt. This will impact your score up to 125 points and will be in your report for 7 years from the date of the debt settlement.
  4. Late payments – Payments past the due date will increase their impact on your credit score after 30 days. They impact your credit up to 110 points, and this derogatory mark remains active in your credit reports for 7 years as of the date of late payment.
  5. Collections – When an account becomes severely past due, the lender may decide to turn the account over to a collection agency. They come from unsecured accounts, such as credit cards or personal loans. They impact your score up to 110 points and will remain in effect for 7 years from the first date of delinquent payment.

Removing derogatory marks

Top ↑

If you see inconsistencies or incorrect information on your credit reports, you can start a dispute process with the credit bureaus. To have a better output of the situation, it’s recommended to report the error within 30 days of its occurrence. To make sure you don’t miss any errors, constantly check your credit score to identify any score drops on time. Remember that at Crediverso you can review your credit score completely for free.

Category

Daniel Quiroz

See author's posts