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Derogatory ratings can negatively impact your credit score and also negatively affect your state of mind. If there is a derogatory mark on your credit report, you are probably wondering how it will affect your creditworthiness. You can also find out how long a derogatory mark will remain on your credit report and if there is a way to challenge it and restore your credit score.
Let’s take a closer look at derogatory marks – what they are, how long they persist, how they affect your reputation, and what you can do to challenge them.
What is a derogatory mark?
The derogatory mark appears on your credit report after a negative financial event, such as a missed credit card payment. Some derogatory marks are directly related to how you manage your credit cards and loans.
For example, if your home is foreclosure, you might expect a derogatory note on your credit report. You can also expect to see pejorative marks if you start the debt settlement process, as it often involves paying your creditors less than you originally owed. Other pejoratives are associated with larger financial issues such as tax rights, civil judgments, and bankruptcy.
How do derogatory ratings affect your credit score?
Most derogatory ratings negatively impact your credit score. Because 35 percent of your FICO credit score is based on your payment history, for example, putting a derogatory note on your credit report for not making a payment could cause your score to drop dramatically.
Different types of derogatory marks affect your credit score in different ways. For example, a late payment can hurt your credit, but not as much as a foreclosure. The more serious the financial issue, the more the mark can hurt your credit score.
How do I get a derogatory mark on my credit report?
In many cases, you will know exactly why you have a derogatory note on your credit report. For example, if you file for bankruptcy, the three major credit bureaus will be notified and you will see derogatory marks on each of your three credit reports.
In some cases, you may not know why there is a derogatory note on your credit report. For example, if your credit report says you missed a payment but remember that all payments were made on time, you may need to contact your credit card issuer.— or dispute the derogatory mark with credit bureaus.
How can I challenge a derogatory note on a credit report?
Challenging a pejorative is a relatively simple process. Experian, Equifax and TransUnion offer online dispute forms and in many cases you can expect a resolution within 30 days.
If you think there is an error on your credit report, don’t worry. This happens more often than many people think. In many cases, credit report errors appear when two creditors have the same name. Errors can also appear if your report contains outdated information, such as an old address or phone number. That’s why it’s important to check your credit reports regularly and challenge any errors you find.
How long do derogatory marks stay on your credit report?
Most derogatory marks remain on your credit report for seven years, although some of the more serious ones may remain on your credit report 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 pejorative. While your credit score is likely to suffer, you can start improving your credit score by making timely payments, keeping your balance low, and avoiding applying for a new loan. Over time, your derogatory mark will likely have less of an effect on your credit score, especially if you continue to build a positive credit history.
bottom line
Derogatory ratings can damage your reputation, but not forever. In some cases, they are due to errors in the credit report that you can successfully challenge. In other cases, these marks appear after you miss a payment, start the debt repayment process, or take some financial action that suggests you may be a temporary credit risk.
Derogatory marks may remain on your credit report for seven to ten years, but you can rebuild your credit by continuing to practice good financial habits, such as making payments on time and avoiding credit card debt.
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