How Long Do Derogatory Marks Stay on Credit? A Detailed Guide

A derogatory mark on your credit report is any entry that indicates poor financial behavior, such as a late payment, delinquent account, or foreclosure. While some derogatory marks are more significant than others, all of them will negatively impact your credit score.

Since lenders use your credit score to make loan decisions and set interest rates, derogatory marks can have a significant effect on your personal finances. Thankfully, these marks don’t last forever. What’s more, there are key steps you can take to speed up the process of removing them.

Key Takeaways:

• Derogatory marks are adverse notes on your credit report. Each mark can potentially impact your credit score by 100 points or more.
• Events that can result in derogatory marks include late payments, charge-offs, foreclosures, and bankruptcies.
• Most derogatory marks stay on your credit report for seven years, although it’s possible to get inaccurate marks removed sooner by filing a dispute.
• Rebuilding your credit starts with strong financial habits like making on-time payments and reducing your credit utilization ratio.
• Credit score repair is a slow process, so it’s important to be patient. Derogatory marks take time to fall off a credit report and improving your score can take months of disciplined behavior.

What is a derogatory mark?

A derogatory mark refers to any negative item on your credit report. This item can be relatively minor, indicating a missed deadline or a late payment on your credit card. It could also be more severe, such as bankruptcy or foreclosure. In either case, a derogatory mark is an indication of a less-than-stellar financial history that can negatively impact your credit score.

A low credit score can make it more challenging to secure a loan or line of credit. This is especially true for first-time borrowers or those with a short credit history. But while derogatory marks can make it harder to build credit, they don’t last forever, with their impact falling as time goes on.

Different types of derogatory marks on your credit report

Late payments

Late payments are one of the most common types of derogatory marks seen on credit reports. Lenders will generally report late payments to credit bureaus after 30 days, with further reporting at 30-day intervals. Late payments can reduce your credit score by up to 100 points, but their impact diminishes over time.

“Late payments will gradually fade off with time and become less important,” says Reilly S. White, Ph.D., an Associate Professor of Finance at the University of New Mexico. After seven years, late payments drop off your credit report entirely. If you’ve missed a payment, ensure to make it as soon as possible to minimize the credit score impact and prevent the account from being charged off.

Charge-offs & collections

If a lender hasn’t received payment on an outstanding debt for a long time, they may “charge off” the account, deeming it unlikely to be collected. These unpaid bills will show up as derogatory marks on your credit report, potentially impacting your score by an additional 100 points. Like late payments, charge-offs will remain on your credit report for seven years.

In some cases, a lender will transfer this debt to a collections agency. If this occurs, a new collections mark could show up on your credit report, further impacting your credit score. Paying a charged-off account may lessen its credit score impact, although the derogatory mark will remain. Note that recent federal action means that unpaid medical bills will not appear on a credit report, even if the account is sent to collections.

Bankruptcy

Bankruptcy is a legal process in which borrowers can eliminate or renegotiate unmanageable debt burdens. While bankruptcy can offer a lifeline to those drowning in debt, it also comes with serious credit consequences. Not only can bankruptcy result in an immediate hit of up to 200 points on your credit score, but it will stay on your credit report for either seven years (in the case of Chapter 13 bankruptcy) or ten years (Chapter 7 bankruptcy).

Foreclosure

If you fail to make payments on a collateralized loan, the lender may foreclose upon the asset, seizing it in lieu of payment. The term ‘foreclosure’ is often applied to mortgages, while ‘repossession’ is more common for auto loans. In either case, failing to pay a collateralized loan and having your assets seized can impact your credit score by up to 100 points and stay on your credit report for seven years.

Tax liens & civil judgments

Tax liens and civil judgments are both situations in which a court rules that a debtor must pay a certain amount owed, either to the government or a private party. While these rulings historically appeared on an individual’s credit report, the three major bureaus ended this practice in 2017, meaning they no longer impact your credit score. Still, lenders may consider this information when evaluating a loan application, as both tax liens and civil judgments are a matter of public record.

How to dispute inaccurate information on your credit report

Even if you have a stellar credit history, it’s still possible for derogatory marks to make their way onto your credit report due to reporting mistakes. Unfortunately, lenders and credit bureaus aren’t perfect. In some cases, inaccurate derogatory marks can be reported under your name and negatively impact your credit score.

To catch these mistakes early, it’s important to regularly read and review your credit reports for accuracy. Thankfully, removing inaccurate marks from your credit report is a straightforward process:

1. First, obtain a copy of your credit report from all three major bureaus. Your credit reports can differ between bureaus, so this will help you determine which ones you need to contact.
2. Next, fill out the dispute form for all the credit bureaus reporting inaccurate information. This dispute form can be found on each bureau’s website. You will likely need to include your social security number, identifying documentation, and a letter clearly indicating which account(s) you’re disputing.
3. Once you’ve completed the relevant forms, you can either physically mail them or upload them through each bureau’s online portal. Uploading the documents typically results in quicker processing times.
4. Finally, monitor the status of your despite through each bureau’s online tracking system. The investigation process typically takes at least 30 days, so be sure to check on the dispute status at that time.

While it often takes the credit bureaus about a month to correct disputes, more complicated situations could take longer. In the unlikely scenario that a credit bureau refuses to correct information that you know to be inaccurate, you can file a complaint with the Consumer Financial Protection Bureau, or contact an experienced credit attorney.

How to remove derogatory marks from your credit report

Unfortunately, if the derogatory marks on your credit report are accurate, you have limited options for removing those marks early. In most cases, you will need to wait the requisite number of years for derogatory marks to fall off your credit report. Still, actions like catching up on delinquent accounts can help prevent the buildup of additional derogatory marks and further hits to your credit score.

Some collection agencies may offer ‘pay for delete’ terms to remove derogatory marks for an extra fee. However, these arrangements are in a legal grey area, and doing so could leave you with little recourse if a bureau decides to keep the mark. Alternatively, some lenders are responsive to ‘goodwill letters,’ which request the removal of a derogatory mark linked to a specific extenuating circumstance (such as a medical emergency).

Disclaimer: OppLoans does not participate in the Pay for Delete practice. For more information on how OppLoans handles charge-offs, please visit our FAQs.

In addition to contacting creditors directly, consider reaching out to credit counseling agencies to explore whether they can offer guidance on removing derogatory marks from your report. In many cases, however, focusing on habits that can improve your credit score while allowing derogatory marks to drop off over time will be a more viable approach.

How to rebuild your credit score

While derogatory marks on your credit report can be frustrating, solid money habits can help raise your credit score and demonstrate financial health to future lenders. Consider these key steps to rebuild your credit over time.

Steps to rebuild your credit:

• Catch Up on Late Accounts: Catching up on late payments won’t remove marks from your credit report immediately. However, doing so can help prevent negative marks from accumulating further, such as through charge-offs and collections.
• Make Timely Payments: Payment history is the largest single factor of your credit score, accounting for 35% of the total. “Even though you may have negative information on your report, a positive payment history that continues to grow will boost your credit score,” says White.
• Reduce Outstanding Debt: Outstanding debt on revolving balances accounts for 30% of your credit score. You can reduce your credit utilization ratio by paying down outstanding balances.
• Consider Credit-Building Loans: Certain types of loans, such as secured credit cards or personal loans, can help you responsibly rebuild your credit score. Ensure that the lender reports payments to the major credit bureaus and maintain disciplined financial habits to prevent falling behind on these debts.
• Regularly Check Your Credit Reports: Monitoring your credit reports over time will help you catch any inaccurate reporting impacting your score. Doing so will also allow you to see when derogatory marks finally drop off your report.

In addition to these steps, consider keeping your old credit cards active to maintain a longer account age and limiting your new credit applications to prevent the buildup of hard inquiries. Bear in mind, however, that rebuilding your credit is not an overnight process, and it will take time to see meaningful results.

Credit score repair takes time

Improving your credit is a marathon, not a sprint. Developing a strong payment history and maintaining a low credit utilization ratio can take months to meaningfully boost your credit score. In addition, some of the biggest gains won’t be seen until derogatory marks fall off your report entirely.

“If a negative account is no longer on your credit report, it’s no longer an influence on your credit score,” says Bruce McClary, Senior Vice President of Communications at the National Foundation for Credit Counseling. “You’re likely to see a change based on the deletion of the account, and if there are no other blemishes on your account, it can make a significant positive difference in the credit score.”

Good financial habits can still make a meaningful difference in the meantime, however. Developing these habits will also help you prevent further derogatory marks in the future “Having negative information drop off does increase your score, but what increases your score up to that point is the seven years of strong repayment and getting back on track,” says Professor White.

Finally, remember that just because an outstanding debt falls off your credit report does not mean that you should forget about it entirely. “Just because it drops off the report after seven years doesn’t mean it’s not legally collectible," McClary says. In many cases, however, the statute of limitations on consumer debt means that lenders cannot sue for repayment after a certain time period. Consider contacting a credit attorney before making payments on old debt to understand the legal implications of doing so.

Conclusion

While derogatory marks on your credit report can impact your credit score, they don’t last forever. Marks like late payments and charge-offs will remain on your report for seven years, while certain types of bankruptcy could remain for ten. If these derogatory marks are inaccurate, however, credit bureaus have a straightforward process for disputing them.

Even before derogatory marks drop off your credit report, it’s possible to improve your score with smart financial habits. Paying your bills on time, maintaining a low credit utilization ratio, and responsibly using credit-building loans can all contribute to a better score. Once those marks do start falling off your report, these habits can help prevent additional derogatory marks in the future.

If you’re struggling with bad credit, personal loans may be able to help you improve your score by demonstrating a history of consistent on-time payments.

Bruce McClary is vice president of communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce began his nonprofit financial counseling career in 1998 when he moved from the lending industry to become a credit counselor.

Reilly S. White, Ph.D., is an associate professor of finance and the Endowed Bank of America Lecturer at the University of New Mexico. In addition to teaching MBA students, White serves as the University Outreach Chair for the Chartered Financial Analyst Society of New Mexico, chair of the Cassidy CFA Scholarship, and advisor for the $3.6 million student-run regent’s portfolio.