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​Negative/Derogatory Items

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Understanding Negative Items on Your Credit Report​

Negative items on your credit report signal to lenders that you may be a high-risk borrower, impacting your credit health, approval chances, and loan terms. However, errors or unfair derogatory marks can also appear on your report, making it crucial to review your credit history and address any discrepancies.​

 

Types of Negative Items and Their Impact

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1. Late Payments

Late payments occur when you fail to pay an account on time, typically after 30 days. The impact varies, with longer delays (60, 90, or 120 days) causing greater damage. Late payments remain on your report for up to seven years.

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2. Charge-Offs

A charge-off happens when a creditor deems your debt uncollectible, usually after 90 to 180 days of non-payment. This severely impacts credit scores and can remain on your report for seven years. Charge-offs may also lead to collections, further damaging your credit.

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3. Collections

Unpaid debts sold to collection agencies appear as collection accounts, significantly lowering credit scores. Common examples include medical bills, utility payments, and loans. Collection accounts stay on your report for seven years.

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4. Repossessions

When you default on a secured loan (e.g., car loan), lenders may repossess the collateral. A repossession remains on your report for seven years and indicates financial instability.

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5. Foreclosures

A foreclosure occurs when a lender reclaims property due to missed mortgage payments, typically after three months of non-payment. This remains on your credit report for seven years and significantly affects creditworthiness.

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6. Bankruptcies

Bankruptcies signal extreme financial distress. There are two main types:

  • Chapter 13 Bankruptcy: Stays on your report for seven years.

  • Chapter 7 Bankruptcy: Remains for ten years due to its severe impact.

 

How to Improve Your Credit with Negative Items

  1. Despite having derogatory marks, you can take steps to rebuild your credit:

  2. Derogatory MarkSteps to Improve Credit

  3. Late PaymentPay off the debt ASAP; request a late fee waiver; maintain on-time payments moving forward.

  4. Charge-Offs/Collections Pay the debt or negotiate a settlement and request item removal.

  5. Debt Settlement Pay the settled amount to prevent further negative impact.

  6. Repossession Negotiate with the lender for removal; maintain timely payments on other accounts.

  7. Foreclosure Keep existing accounts in good standing; avoid new delinquencies.

  8. Bankruptcy Use credit builder loans or secured credit cards to demonstrate responsible financial behavior.

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Removing Derogatory Marks from Your Credit Report

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Request and Review Your Credit Report

You can obtain free annual credit reports from Experian, Equifax, and TransUnion via AnnualCreditReport.com. Review them for errors in personal details, account status, balances, and payment history.

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Dispute Inaccurate Information

If you find errors, file a dispute with the credit bureau(s) reporting the incorrect information. Provide supporting documents, such as payment records or correspondence with the creditor. Disputes typically take 30 to 45 days to resolve.

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Follow Up on the Dispute

Credit bureaus may request additional information. Ensure timely responses and keep records of all communication. If the dispute is successful, the erroneous mark should be removed, improving your credit score.

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Seek Professional Help

If disputes don’t yield results, consider professional assistance from a reputable credit repair agency to navigate complex cases.

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By actively monitoring and managing your credit, you can mitigate the impact of derogatory marks and work towards financial stability.

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