What does Derogatory Credit Mean?

An individual’s credit history that is prepared by a credit bureau is what a credit report is. It is a rather detailed report that encompasses information about the creditor’s activities. It is the responsibility of the credit bureau to collect necessary information and prepare the report. This report is used to verify the loan applicant’s worthiness to credit. Usually the credit report contains details like the personal history of the applicant and their recent paying habits.

The credit report is in its entirety your financial horoscope where every little bit of information will be taken by the bureau to gain an understanding. Details like your employment history, current addresses etc. will be made available by the credit bureau. They wanted to get an idea whether the loan applicant is settled enough to handle the payment and repayment issues. With the financial knowledge they gained from the report, a detailed analysis can be made about your appeal to the credit bureau. Generally credit report hold on to the negative information on the loan applicant for seven years and details on the bankruptcy (if any) will stay on to ten years on the report.

The term derogatory credit means the saving of critical or negative information on your report. This can be understood from the name itself. Items like delinquency (which you may have in the past), high balances, or any details that give away that the loan applicant is a risk factor with the risk of borrowing more money. All these details that are negative are saved and recorded in your credit report that might be kept by the credit bureau or on the public records.

There are numerous ways in which a derogatory credit will affect the loan applicant’s credit score. You don’t even need to do a felony charge or bankruptcy to affect your credit score. A simple late payment will also put your credit dreams into jeopardy. But the effect of being bankrupt would result in a massive reaction on the credit score though. Charge-offs, layoffs, tax liens, repossession, foreclosure, debt settlement, bankruptcy etc. will affect the credit score that will declare you as a risk factor and will in the end leave a massive dent in your credit report. And that leads to you having a derogatory credit report that will affect your future endeavours massively.

Having a derogatory credit doesn’t mean that the applications will be rejected or denied. The end result would be you struggling to find the creditors for your financial needs. You will need to wait a whole lot of time more than someone who has a perfect credit report. The main risk factor would be the action of paying a higher interest, if you are having a derogatory credit report.

The derogatory credit report will be with you for a long time. As mentioned earlier, the derogatory credit information like bankruptcy will inadvertently exist in your credit report for ten years. For late payments and debt collection reports, this might lead on to only seven years.

You can pay off the derogatory credit items from your credit report, even though the derogatory item won’t be removed from the report.