Get That Derogatory Mark Off Your Credit Report!

We all try our best to maintain a good credit score – after all, it's our credit score that decides if we'll be able to get that mortgage, credit card, auto loan or small business loan that we want. However, did you know that despite your best efforts, the presence of a single derogatory mark on your credit report can destroy your house-buying or car-owning dreams?

What Are Derogatory Marks?

Derogatory marks are negative records on your credit report that may have a detrimental impact on your overall credit standing. Depending on the infraction, derogatory marks can stay on your report for seven years or more. Late credit card or loan payments, collections accounts, court judgments such as lawsuits for amounts owed on credit cards, personal loans, etc. all constitute derogatory marks. Other more serious examples of derogatory marks are public records such as unpaid child support, unpaid alimony, delinquent taxes, foreclosures, auto repossessions and bankruptcy. While calculating your credit score, many credit scoring models take into account the number of derogatory remarks on your credit report. At times, just one derogatory mark may cause your score to drop drastically.

Dealing with Derogatory Marks

So what do you do if you have a derogatory mark on your credit report? Luckily, there are steps that you can take to minimize the damage stemming from such marks. While none of these measures are likely to show instant results, they will certainly bear fruit in the long run.

1. Ensure the Accuracy of the Record: According to the Federal Trade Commission, about one in five consumers has a mistake with at least one credit bureau. It is possible that the derogatory mark on your report may be an error, so examine your report from each credit bureau to determine its accuracy. In case the mark is a mistake, you can go ahead and dispute the notation to have it removed from your file.
2. Pay the Minimum to Avoid Additional Damage: If you have a past due balance, paying the minimum amount due will prevent the account from becoming increasingly delinquent. While this will not make the "late payment" mark go away, it will at least change your account status from "past due" to "on time." Some lenders will even offer to remove the late payment in exchange for setting up a repayment plan.
3. Negotiate: Most creditors would prefer to get some payment rather than receive no payment at all. You may be able to negotiate a deal with your lender which would allow you to settle your debt by repaying a lesser amount than you actually owe, either in one lump sum or in monthly installments. We recommend doing this directly with the original creditor, not a debt collector or collection company.
4. Erase the Negative Record Over Time: By consistently paying your bills in full and on time, you can gradually devalue the negative record on your credit report. In other words, all of the good credit history will “outweigh” the bad and minimize its impact on your report and scores.
5. Write an Explanation: Sometimes bad credit may be due to loss of employment, illness or other unexpected events. Credit bureaus permit consumers to include written explanations for derogatory items on their credit report. While this won't remove the mark, it will nevertheless allow lenders to take your explanation into account while considering your credit application.

Your credit report is similar to a finger print, in that everyone’s credit situation is a little different. Our clients come to us from all kinds of backgrounds and financial situations so our consultants are trained in ways to optimize your credit report. If you have questions about any negative remarks on your report or if you’ve done the above steps and would like to see if you qualify for $50k-$250k of 0% interest business funding, call our office at (800) 996-0270. We will be happy to help!