Here are steps you can take to establish your independence after financial abuse and help ensure long-term financial health.
What is derogatory?
Derogatory is how lenders describe negative marks in someone’s credit history. Derogatory information can hurt someone’s credit score and prevent her from taking out a loan. It can also stay on a credit report for as long as 10 years.
When derogatory information is reported to credit bureaus, it appears on the borrower’s credit report and could hurt her credit score. Most stay on the credit report for seven years, with some exceptions. Derogatory information includes:
- Bankruptcy: Bankruptcy severely damages the borrower’s credit, and it stays on his credit report for 10 years.
- Foreclosure: Foreclosure tells potential lenders that a borrower was so delinquent on a mortgage that she lost her house.
- Tax liens: Tax authorities may use a tax lien to obtain the money owed to them. Unpaid tax liens may stay on the taxpayer’s credit report indefinitely.
- Collections: Creditors may sell or pass off unpaid debt to a debt collector to settle. These accounts are reported as derogatory information.
Lenders can use a derogatory mark on a person’s credit report to deny him a loan or credit card, or to offer him loans with poor rates.
Do you have bad credit but still need a personal loan? Bankrate can help you find the best one.
Ted lost his home after defaulting on a mortgage. The foreclosure was reported in his credit history, and he now has trouble qualifying for a decent rate on a new loan. The derogatory mark stays on his credit history for seven years while he rebuilds his finances.