What Are Derogatory Marks on Your Credit?

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Derogatory marks on your credit report are negative items that indicate delinquencies or defaults on your credit obligations. They impact your credit score and can affect your ability to obtain new credit, secure favorable interest rates, and even get a job or rent an apartment.

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Types of Derogatory Marks

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There are several types of derogatory marks that can appear on a credit report:

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1. Late Payments: Payments made past the due date can be reported as late, typically after 30 days, and can remain on your credit report for up to seven years.

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2. Collections: Unpaid debts that a creditor has transferred or sold to a collection agency. This mark can remain on your report for up to seven years from the date of the first delinquency.

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3. Charge-Offs: When a creditor writes off a debt as a loss because it is unlikely to be collected. Charge-offs stay on your credit report for up to seven years.

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4. Bankruptcies: Legal proceedings involving a person or business that cannot repay outstanding debts. Chapter 7 bankruptcies remain for up to ten years, while Chapter 13 bankruptcies stay for up to seven years.

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5. Foreclosures: The process where a lender takes possession of a property due to the borrower’s failure to make mortgage payments. This mark remains for seven years.

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6. Repossessions: When a lender takes back property (usually a vehicle) due to non-payment. Repossessions stay on your report for up to seven years.

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7. Tax Liens: Claims by the government on your property due to unpaid taxes. Paid tax liens can remain on your report for up to seven years, while unpaid ones can stay indefinitely.

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8. Judgments: Court orders mandating payment of a debt. These can remain on your credit report for up to seven years.

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Important Definitions

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• Delinquency: Failure to make payments on time.

• Charge-Off: An account that a creditor has given up on collecting after a significant period of delinquency, but that does not mean the debt goes away for the debtor. The amount is sent to a Collection agency who pursues the collection

• Bankruptcy: A legal process to eliminate or repay some or all debts under the protection of a bankruptcy court.

• Foreclosure: The process of taking possession of a mortgaged property when the borrower fails to make mortgage payments.

• Repossession: The act of taking back property by a lender or seller from the borrower due to default.

• Tax Lien: A legal claim by the government against the property of a non-compliant taxpayer.

• Judgment: A court order that dictates the debtor must pay a certain amount to the creditor.

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Additional Information

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• Impact on Credit Score: Derogatory marks can lower your credit score, depending on the severity and number of marks.

• Duration on Credit Report: Most derogatory marks remain on your credit report for seven years, though some, like Chapter 7 bankruptcy, can stay for up to ten years.

• Mitigation Strategies: Paying off collections, negotiating with creditors, and seeking credit counseling can help mitigate the impact of derogatory marks over time.

• Monitoring: Regularly checking your credit report can help you stay informed about any derogatory marks and address them promptly.

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Useful Resources

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For those looking for more information on derogatory marks and how to handle them, consider exploring resources from credit bureaus (Experian, TransUnion, Equifax), the Consumer Financial Protection Bureau (CFPB), and credit counseling organizations.

These sources provide comprehensive guides and tools to understand and improve your credit health.

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Disclaimer: Yendo is not a provider of financial advice. The material presented on this page constitutes general consumer information and should not be regarded as legal, financial, or regulatory guidance. While this content may contain references to third-party resources or materials, Yendo does not guarantee the accuracy or endorse these external sources.

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