In short, a ‘derogatory’ is a negative mark on your credit report. This easy guide explains what may cause a derogatory to appear and what you can do to potentially remove an inaccurate one from your credit report. Let’s begin with some derogatory basics.
What is a Derogatory?
When referring to credit, a derogatory is negative by nature and typically indicates a case of financial negligence on your report. For instance, items such as a late payment or auto repossession could lead to a derogatory mark on your credit report.
How Derogatory Marks Affect Your Credit
Derogatory marks are one of the largest causes of bad credit. For example, if you are applying for a new line of credit, the amount and severity of derogatory marks on your report could impact whether or not you receive approval (see my $0 credit score). Moreover, even if approval is granted, derogatory marks may also impact the terms and interest rate you may be offered.
What Causes a Derogatory Mark?
Any item or financial activity that lenders may view as a ‘credit risk’ could result in a derogatory mark on your report. At a glance, here is a list of common items that may lead to a derogatory mark.
- Late payment
- Account in collections
- Any negligent or delinquent financial activity
For best credit results, consumers should strive to avoid derogatory marks altogether. However, this may be easier said than done – especially if a derogatory contains an inaccuracy.
Inaccuracies Could Be to Blame
According to CBS News, 4 out of 5 credit reports contain at least one error. If left to chance, errors such as an incorrect late payment or fraudulent account could result in a derogatory mark on your report. But it’s not always this black and white. In fact, errors and inaccuracies can take many forms. For example, here are a handful of ways inaccuracies could appear on your credit report.
- Duplicate item
- Typographical mistake
- Inaccurate amount
- Item over the statute of limitations
- Mistaken identity
- Activity or an account opened without your knowledge
Check Your Credit Reports for Inaccuracies
Are derogatory marks impacting your creditworthiness? If so, it could be the result of an inaccuracy. To find out, access your 3-bureau credit reports and scores now.
How to Remove a Derogatory Mark From Your Credit Report
If your credit report does contain a derogatory mark, take a closer look to determine whether or not the item is accurate. Depending on the legitimacy of the item, below are some options to possibly remove it.
Accurate Derogatory Items
If the derogatory item is accurate, your options for removal are fairly limited. One option is to ride out the ding until the statute of limitations is up. Another is to try to negotiate a payment in exchange for a deletion agreement with the creditor directly. In this case, the creditor will likely have the upper hand and may or may not grant your request.
Inaccurate Derogatory Items
If you believe a derogatory item on your report is inaccurate, fraudulent, or contains an error, your best removal option is to dispute it. If you want to remove an inaccurate derogatory mark, ScoreShuttle allows you to digitally file and manage your disputes with ease (start disputing).
How the Dispute Process Works
When it comes to your credit, disputing is the act of challenging errors listed on your report. The goal of disputing is to ideally remove any derogatory information that you believe is inaccurate. The dispute process works in the following three phases.
- Dispute. To begin a dispute, send a dispute letter to the affected credit bureau(s). Keep in mind that credit information can fluctuate from one bureau to the next. Because of this, it’s important to review your credit reports from all 3: Experian, TransUnion, and Equifax (review my 3-bureau credit reports).
- Review. Once received, the credit bureau(s) will review your dispute to determine the next steps.
- Respond or Remove. By law, the credit bureaus have 30-days after they receive a dispute to either respond or remove the item from your report. If your dispute results in derogatory removal, you could see an uptick in your credit scores!
Manual vs. Digital Disputing
The dispute process above can be done manually by collecting the proper documentation and mailing your disputes by hand. Alternatively, the fastest, easiest way to potentially remove an inaccurate derogatory mark is to dispute it online. If you’d prefer the digital route, you can use ScoreShuttle to review your 3-bureau credit reports and dispute inaccuracies in just a few clicks (start disputing). ScoreShuttle also allows you to manage and track your disputes online 24/7.
Fewer Derogatory Marks Could Lead to Better Credit
Here’s the best part! Anytime you successfully remove an inaccurate derogatory mark from your report, it could positively impact your creditworthiness. Generally speaking, the more derogatory items you are able to either avoid or remove, the better credit results you could achieve.
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