How to Remove Derogatory Items From Your Credit Report

Removing derogatory items from credit reporting is a key step in improving credit. Here’s what you should know.

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Remove Derogatory Items From Your Credit Report

A clean credit report is key to getting most of your applications approved. Derogatory items can land on your credit report whenever you make a misstep with your credit accounts. Late payments, high balances, bankruptcy, and debt collections are all derogatory items that can damage your credit, hurt your credit score, and make it harder for you to get approved in the future. If you are approved despite having derogatory items on your credit report, you may end up with higher interest rates or down payment requirements than if you had a clean credit report.

Derogatory items don’t stay on your credit report forever. You may be able to remove derogatory items from your credit report if you take the right steps.

How Derogatory Marks Land On Your Credit Report

Most credit card companies and lenders send regular account updates to the credit bureaus. They’re not legally obligated to report your account information, but when they do, they must report only accurate and timely information. Creditors typically have an agreement with the credit bureaus to provide information about your account.

Details about how you manage your credit cards and loans are sent to the credit bureaus each month. The creditors report your balance and payment information. If you miss a payment by more than 30 days, that information is sent to the credit bureaus and included on your credit report. When you default on a payment and the account is sent to a collection agency, that agency will send details of your account to the credit bureaus.

The credit bureaus also use local, state, and federal public records to find information about foreclosure, bankruptcy, repossession, lawsuit judgments, and tax liens. Whenever this derogatory information is discovered, it’s updated on your credit report.

How to Spot Derogatory Marks on Your Credit Report

How to Spot Derogatory Marks on Your Credit Report

Don’t assume a business will notify you before adding a derogatory mark to your credit report. Some may send you an update if your account is at risk of going into default. However, by that time, you’ve likely already had several months of missed payments added to your credit report.

If you want to know if there are derogatory marks on your credit report, you have to pull a copy of your credit report. Since your credit reports can be different from one another, it’s important to check copies of your credit reports from the three major credit bureaus – Equifax, Experian, and TransUnion. This can be done one at a time or through a tri-merge credit report. Each consumer is entitled to a free copy of their credit report each year and you can visit AnnualCreditReport.com to obtain that free credit report.

You can also use a free credit monitoring service like Credit Karma or Credit Sesame to get an overview of your credit information and a list of derogatory marks on your credit report. They don’t provide a full version of your credit report, but will provide enough details to help you understand the key factors affecting your credit report.

Alternatively, you can purchase your credit report by visiting the websites of any of the major credit bureaus or myFICO.com. You might purchase your credit report if you’ve already obtained your free credit report within the past 12 months and you want a more complete version of your credit report than you’d find on a free website.

Once you have your credit reports, read through them and highlight derogatory items such as:

● late payments
● accounts that aren’t yours
● high balances
● incorrect credit limits
● accounts reporting as closed that are still open
● collection accounts
● public records like bankruptcy, foreclosure, etc.
hard credit inquiries

How Long Do Derogatory Items Stay On Your Credit Report

The credit reporting law – the Fair Credit Reporting Act – defines how long a derogatory item can stay on your credit report. The credit bureaus are only allowed to report these items for that time limit and then the items can no longer be included on your credit report. Most derogatory items, like late payments and collection accounts, can only stay on your credit report for seven years. Some types of bankruptcy can remain on your credit report for ten years.

Accounts that are still open, but have no derogatory remarks will stay on your credit report indefinitely. There’s no legal requirements for credit bureaus to remove accounts that were closed in good standing. These types of accounts generally don’t count against you.

If an item is close to falling off your credit report, you may decide not to dispute it and just wait for it to fall off. If you’re not preparing to make any credit applications in the near future, waiting it out can be a wise move.

How to Remove Derogatory Items From Your Credit Report

You are legally entitled to an accurate, complete, and timely credit report. Any information on your credit report must fit those three criteria. As you review the derogatory items on your credit report, make sure they fit all three of those categories. If there are any errors with the items on your credit report, you can file a dispute with the credit bureaus to have the items removed from your credit report.

A credit report dispute is simply a statement to the credit bureaus that a particular item should not be on your credit report. For example, if your credit report shows that you were late on a payment when you were actually on time, you can file a dispute to have the payment information corrected.

You can dispute derogatory items online or by writing a letter to the credit bureaus. When you file a dispute, you should also include copies of any proof you have that supports your dispute. For example, if you have a payment receipt showing that your payment was made on time, it will help prove your dispute.

Once the credit bureau receives your dispute, they will conduct an investigation which includes checking with the business that reported the derogatory item. The business will review their own records and let the credit bureau know whether the item is indeed misreported.

It can take up to 45 days for the investigation to be completed and the derogatory item removed from your credit report. In the meantime, your credit report will be updated to show that you’ve disputed this information.

How Paying an Account Affects Derogatory Information

How Paying an Account Affects Derogatory Information

Note that simply paying off an account does not remove the derogatory item from your credit report. Any past due account will be updated to show that you’ve paid and your balance information will decrease based on the amount you paid. However, the derogatory marks associated with the account will continue to be reported unless you take steps to have the information removed.

In some cases, you may be able to negotiate with the creditor to have the derogatory marks removed in exchange for payment. If you’re considering a request like this, you should make it before you send payment and get the agreement in writing. Once you make the payment, the creditor will remove the derogatory remarks based on your agreement.

If you’ve already paid the account, you may ask the creditor to remove a derogatory remark as an act of goodwill. Some creditors may agree.

Note that businesses are not obligated to remove accurate information from your credit report, regardless of whether you pay the account. Some may be willing to negotiate with you depending on the payment and the circumstances, but it is not a requirement.

It may benefit you to pay a derogatory account even if the creditor will not agree to remove it from your credit report. Taking care of the past due balance may be the only way to other businesses to approve your credit card, loan, or apartment rental applications. Once your past due accounts are paid in full, you’ll have an easier time getting new applications approved.

Improve Credit Score

How Will Your Credit Score Improve?

Derogatory information hurts your credit score. The more recent the derogatory mark, the more it affects your credit score. Removing derogatory items from your credit report can help you improve your credit score. It’s hard to pinpoint the exact amount your credit score will increase because it depends on the type of information that’s removed, how recent the information was, and how much other positive information is on your credit report.

Having more severe derogatory items, like bankruptcy or collection accounts, removed from your credit report will likely give you the biggest credit score increase.

There’s no guarantee your credit score will improve at all after you’ve had derogatory marks removed from your credit report. This is especially true if you had a minor item like a credit report inquiry removed from your credit report. Regardless of the impact to your credit score, it’s worth it to take the effort to remove inaccurate information from your credit report. With negative information removed from your credit report, you improve your ability to get approved for credit cards and loans. Removing negative information also allows you to begin improving your credit score over time with timely payments and proper credit management.

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