How Long Are Derogatory Marks on Your Credit?
Learn how long past financial missteps impact your credit score and what you can do to improve your credit standing over time.
Credit reports serve as a comprehensive record of an individual’s financial history, detailing how credit has been managed. These reports are compiled by credit bureaus and are used by lenders, landlords, and some employers to assess financial responsibility. Negative information, often referred to as derogatory marks, can significantly impact this financial standing. Understanding these marks and their reporting duration is important for financial well-being.
Understanding Derogatory Marks
A derogatory mark on a credit report signifies a failure to meet financial obligations as originally agreed upon with a creditor. These entries indicate a heightened risk to potential lenders, as they reflect past instances of non-payment or delayed payment.
Common types of derogatory marks include late payments, which are typically reported when an account becomes 30 days or more past due. Collection accounts arise when a debt is transferred to a collection agency due to prolonged non-payment. A charge-off occurs when a creditor deems a debt uncollectible and writes it off as a loss, though the debt remains owed.
More severe derogatory marks can include bankruptcies, which are legal proceedings to discharge or restructure debts. Foreclosures, resulting from defaulting on a mortgage loan, also appear as derogatory marks. While civil judgments and tax liens were once common, changes in reporting standards mean these are less frequently included on credit reports now.
Reporting Durations for Different Marks
The length of time derogatory marks remain on a credit report is generally governed by the Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681c. This federal law establishes the maximum periods for which most negative information can be reported.
Late payments typically remain on a credit report for seven years from the date of the original delinquency. This period begins from the first missed payment that led to the delinquency, regardless of subsequent payments. For collection accounts, the seven-year reporting period begins from the date of the original delinquency that led to the collection, not from when the collection agency acquired the debt.
Charge-offs are also generally reported for seven years from the date of the first missed payment that led to the charge-off. Even if the debt is later paid, the charge-off entry will remain on the report for the full seven-year period, though its status may be updated to “paid.” Bankruptcies have varying reporting durations based on the type filed. A Chapter 7 bankruptcy, which typically involves liquidation of assets, can remain on a credit report for up to 10 years from the filing date. A Chapter 13 bankruptcy, which involves a repayment plan, usually stays on a credit report for seven years from the filing date.
Foreclosures generally remain on a credit report for seven years from the date of the first missed payment that initiated the foreclosure process. While civil judgments and tax liens were once commonly reported, credit bureaus implemented changes by April 2018 to remove most tax liens and civil judgment records from credit reports. The underlying debt remains.
Impact of Mark Removal
When derogatory marks reach their reporting limit, credit bureaus are generally required to remove them automatically from a credit report. The expiration of these marks can have a positive effect on a credit score, as the negative weight of the information is lifted.
The extent of credit score improvement after removal can vary depending on factors such as the severity and age of the derogatory item, and the overall credit profile. A significant negative mark, like a bankruptcy, will likely have a more pronounced impact upon removal than a single late payment. It is important to recognize that the removal of a derogatory mark from a credit report does not erase the underlying debt itself. The debt may still be legally owed to the original creditor or a collection agency, and creditors may continue collection efforts.
Disputing Errors on Your Report
Regularly reviewing credit reports from each of the three major credit bureaus—Experian, Equifax, and TransUnion—is an important step in identifying any potential inaccuracies. Errors can include incorrect account information, accounts that do not belong to you, or derogatory marks that should have been removed due to reporting time limits. Addressing these errors promptly helps maintain the accuracy of your credit history.
To initiate a dispute, gather all relevant supporting documents. These may include bank statements, proof of payment, or correspondence from creditors that substantiate your claim of inaccuracy.
The dispute process typically involves contacting the credit bureau directly, either online, by mail, or by phone. You will need to clearly identify the specific item being disputed and explain why it is inaccurate, providing the supporting documents you have gathered. Federal law requires credit bureaus to investigate disputes within 30 days. If the information is found to be inaccurate, it will be corrected or removed from your report. If the credit bureau’s investigation does not resolve the issue, you can dispute the information directly with the data furnisher, the entity that originally provided the information to the credit bureau.