How To Get Derogatory Marks Removed From Credit Report

A credit report is one of the most critical aspects when checking your borrowing history. The report also goes hand in hand with your FICO scores. Usually, you can get your credit report for free from the credit bureaus. Every year, every American is entitled to a free credit report to check on various items and confirm if everything is okay. You will know how to get derogatory marks removed from credit report later. 

We have three bureaus that come up with credit reports independently. They include Equifax, Experian, and TransUnion. They are also responsible for score calculation, whereby you can get your scores upon opening an account and purchasing the scores. Each of the credit bureaus receives details about borrowers independently from financial companies. That means their reports are unique depending on how they get them.

It is crucial to check your report every year from the three bureaus. Even though we have other sources such as Nerdwallet and Annual Credit, The three bureaus remain the best sources of your borrowing history details. To benefit from the details, you can get your reports in intervals. You can choose to have your Experian report in April, TransUnion in August, and Equifax in December. That ensures adequate reports about your borrowing behavior throughout the year. 

What does a credit report contain?

A credit report summarizes how you have used your credit accounts. It is important to note that a credit report contains various pieces of data. Potential lenders utilize the reports to help them decide whether to approve your loan application or not and at what terms. 

One of the significant aims of checking your report regularly is to ensure the particulars contained therein are accurate and complete. The following are the kind of details that you can find in a credit report.

i) Identifying details

The section includes personal details, such as your name, Social Security number, address, and date of birth. The data contained is not necessary when it comes to calculating FICO scores.

ii) Credit account details

The section contains credit accounts, including credit cards, student loans, mortgages, or auto loans. You also get dates about when the accounts were opened, your loan or borrowing limit or loan amount, balances, and your payment history. Closed accounts may not show if they have dropped off your report after a particular period. Also, accounts not reported to the bureaus by lenders cannot show.

iii) Inquiry details 

We have two types of inquiries which include soft and hard. The soft inquiries are usually from checking your credit reports, companies looking to employ you, or current account reviews. Interestingly, soft inquiries do not affect your scores. 

On the other hand, “hard” inquiries occur when creditors and lenders review your report after applying for a credit service. These include credit cards and loans. The hard inquiries can remain in your report for two years. 

iv) Bankruptcies

 Your credit report contains details about bankruptcy and the types of bankruptcies.

v) Collection accounts

They include past-due accounts turned over to a collection agency. They can be your credit accounts, accounts with doctors, hospitals, retail stores, banks, cable companies, or mobile phone providers. 

What are derogatory marks?

derogatory marks removed from credit report

You might have wondered what derogatory marks are the first time you heard about them. For your understanding, derogatory marks are negative items such as missed payments, repossession, foreclosure, and collections, on your report. Most of them stay on your reports for about 7-10 years. They cause a lot of damage to your FICO scores in that you may not qualify for a loan, or if you get one, you may end up paying high-interest rates. 

Sometimes derogatory marks may be erroneous, and you can file a dispute with the credit bureaus to remove the false details from your credit report. If they are not errors, you will need to wait for them to age off. However, having derogatory marks does not mean that it is the end of you, as you can restore your credit by paying your bills on time and utilizing less than 30% of your borrowing limits to grow your credit scores.

As shown below, various derogatory marks can stay on your reports depending on their weights. 

  • Missed payments: 7½ years
  • Account charge-off: 7 years
  • Foreclosure: 7 years
  • Repossession: 7 years
  • Collections: 7 years
  • Student loan delinquency or default: 7 years
  • Bankruptcy: 7 years for Chapter 13, 10 years for Chapter 7

How to get derogatory marks removed from credit report

Once you find that your report has numerous derogatory marks, you can embark on eliminating them depending on how they got into your report. As I have mentioned above, the one that enters your report genuinely will stay there until the specified time is over. You can refer to the various durations of different kinds of derogatory marks taken to drop from your report from the list above. 

However, suppose the data concerning any derogatory mark in your credit report is wrong, maybe due to identity theft. In that case, you have a right to file a dispute with the concerned credit bureau. Once they find out that the details are wrong, they can drop them down, and you can be clean again. You may find incorrect details, maybe that someone used your particulars to get credit and never paid the debt. All that burden comes to you. That is why it is good to check your credit report now and then. 

How to increase your credit scores

Sometimes you may find yourself in the wrong score category due to defaulting loans or late payments. You should know how to repair credit scores fast to qualify for better loans in the future. The following are ways you can achieve such a goal.

i) Pay off your pending debts.

The first step to setting yourself free from poor scores is paying all your pending debts. You might have defaulted on loans due to hard economic times and now want to bounce back with excellent borrowing capability. There is no alternative way to clean yourself other than paying your past debts to the right lenders. If the debts are with the debt collectors, you can negotiate with them to remove your name upon repaying. 

ii) Get a secured credit card.

A secured credit card allows one to deposit money and borrow against it. The cards are different from unsecured cards in that they require you to have FICO scores to get them. The secured credit cards allow you to build scores either from the bad scores perspective or from scratch. The deposit you place in your card account remains there until you get enough scores to get an unsecured credit card. You can get your deposit amount for use when your scores are okay. 

iii) Mix your credit

Instead of getting only credit cards to borrow money, you can also get other loans such as mortgages, auto loans, and personal loans. That way, various lenders will report your repayment to the credit bureaus every month. That way, you will grow your scores faster. 

iv) Get a credit repair company.

Credit repair companies usually assist you in growing your scores. Credit Saint, Lexington Law, Sky Blue Credit, and The Credit People are some of the best credit repair companies that you can utilize. A credit repair company uses various tools to rejuvenate your scores to favorable levels. They first get your report and do a thorough analysis to see where you went wrong. The services from these companies come at a fee that varies from one company to the other.

v) Keep your credit cards active. 

Dormant cards can affect your scores. It is better to use them all even if you spend small amounts. Some people think that not using your credit cards and avoiding debts is right. You need to note that such an act is disastrous for your overall scoring. 

vi) Spend up to 30% of your credit limit 

It is always advisable to observe a credit utilization ratio of at most 30%. You should never spend more than 30% of your borrowing limit, as that shows the possibility of defaulting on your loans. Financial companies can profile you as a risky borrower. 

How are credit scores calculated?

FICO scores are significant when a borrower determines the amount of loan to give you. The question is, how is the credit score calculated? Most people hear that they have such a number of scores, yet they do not know how they got the scores. Credit bureaus calculate credit scores in the following manner.

  • The payment history takes up to 35% of the overall scoring. It involves the loans you have borrowed and how you have been paying them. 
  • The amount owed. The amount owed takes up to 30% of your borrowing history. There is no problem if you have several credits and are servicing them well. However, if you borrow a lot, you will have too much to pay, which can be detrimental to your scores.  
  • The length of your borrowing history takes up 15%.  
  • Credit mix -10%
  • New credit 10%

Bottom line

Derogatory marks are negative items such as repossession, missed payments, foreclosure, and collections, on your credit report. Most of them stay on your reports for about 7-10 years. They may deny you loans from potential lenders due to the risks they portray. You can see the derogatory marks removed on your Credit report, which you can receive free from each credit bureau. Once they enter your report, they take several years to age off.