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Negative items on your credit report defined

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A step toward better credit is knowing how to identify black marks in your history.

If you’re worried about negative marks on your credit report, knowing how to read your report is an important first step — but that’s easier said than done.

Terminology on your credit report isn’t always easy to understand. Learning what those marks mean and what you can do to remove them is a step to better credit. That can mean better loan terms and APRs on credit cards.

What is a derogatory mark?

Derogatory marks cover things like missed payments and a declaration of bankruptcy. Most derogatory marks stay on your credit report for 7 to 10 years, depending on how bad the mark.

Your credit report acts as a compiled history of your borrowing transactions. Good borrowing behavior, like on-time loan repayments counts in your favor. Borrowing behavior that lowers your score include missed payments and defaulting on a loan.

What negative items can I find on my credit report?

There are a number of derogatory marks that can negatively affect your credit, including:

  • Bankruptcy. Filing for a Chapter 7 or Chapter 13 bankruptcy helps alleviate your debt, but typically stays on your credit report for 10 years.
  • 30-, 60- or 90-day late payment. If you’re 30, 60 or 90 days late paying an account, it’ll appear on your credit.
  • 120+ day late payment. If you haven’t made a payment in at least 120 days many lenders opt to charge off the account.
  • Charge off. If you have an account that’s over 180 days past due, your lender may write off the debt as a loss and send your debt to collections.
  • Collection. If your debt is handed over to a collection agency, it makes an effort to collect the debt through frequent letters and phone calls. If you don’t respond, you could face legal action.
  • Civil claim. If you face a lawsuit because of unpaid debt, it appears on your credit report as a civil claim.
  • Foreclosure. Should you default on your mortgage and your lender repossess your home, and your credit report cites this as a foreclosure.
  • Included in bankruptcy. When you file for Chapter 7 bankruptcy, all the accounts you closed in the agreement are marked as bankrupt.
  • Lien. Should you fail to pay state or federal taxes, a tax lien appears on your credit report. This can remain on your report indefinitely if you don’t pay it.
  • Repossession. If you default on an unsecured loan, like a car, your lender can repossess the property. This shows up on your credit report.
  • Settlement accepted. If a lender settles on a partial payment, but considers the account paid in full, this notation appears on your report. While still a negative mark, this notation is less damaging than not paying it at all.
  • Account in credit counseling. Consumer Credit Counseling Services can help borrowers who are laden with credit card debt by negotiating lower payments. If a lender agrees, this notation may show up on your account.
  • Unknown. You may see this as an X on your report. It means the bureau didn’t get enough information from the lender to confirm the account is paid. While an unknown notation isn’t necessarily a negative mark, it could hold back your credit score. Contact your lender to clear this up.
  • Inquiry. Each time you apply for a loan or credit card, the lender conducts a hard credit inquiry. While it isn’t exactly negative, hard credit pulls affect your credit score by as much as five points per inquiry.

What should I do if I have black marks on my report?

If you think incorrect negative marks on your credit report are keeping your score down, move quickly to improve your score. Here’s what you can do to correct errors on your report:

  • Order a free credit report. You’re entitled to a free annual credit report from the three major credit bureaus once a year. Or for monthly access to your updated report, opt for an online provider like Credit Karma that offers free access to your report.
  • Identify mistakes and errors. Once you have a copy of your report, highlight any errors, such as incorrect payments or duplicate listings.
  • Dispute creditor errors. If a lender sent incorrect information to a reporting agency, contact your creditors to notify them.
  • File a formal correction request. Send a request to credit reporting agencies by mail and include copies of any related documents and proof of the error.

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Bottom line

The first step in navigating the credit repair process is understanding what those negative marks mean and how to get them off to improve your score. Once you do, focus on maintaining a good credit score by making regular, on-time payments. If you think you might miss a payment, reach out to your lender to see how you can avoid negative marks on your credit report.

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Shannon Terrell

Shannon Terrell is a writer for finder.com who studied communications and English literature at the University of Toronto. On any given day, you can find her researching everything from equine financing and business loans to student debt refinancing and how to start a trust. She loves hot coffee, the smell of fresh books and discovering new ways to save her pennies.

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