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Derogatory marks on your credit are negative items such as missed payments, collections, repossession and foreclosure. Most stay on your credit reports for up to seven years, and one type may linger for up to 10. The damage to your credit score means you may not qualify for new credit or may pay more in interest.
If the information is in error, you can file a dispute to get negative marks removed from your credit reports. If the marks are not errors, you'll need to wait for them to age off your credit reports.
The good news is you can start working to restore your credit right away. Paying all bills on time and using less than 30% of your credit limits can have a powerful effect on credit scores.
Here’s how long negative marks stay on your credit reports; click to learn how to recover:
1. Missed payments
If you are at least 30 days late, expect a mark on your credit record. Missed payments typically stay on your credit reports for seven years. The later the payment, the greater the damage to your credit scores.
What to do: Pay up as soon as you can. If you’ve never or rarely been late before, you might be able to get the creditor to drop the late fee. Call the customer service number, explain your oversight and ask if the fee can be removed.
The negative effect on your credit scores will fade over time. Stay on top of all your payments so positive information in your credit reports dilutes the effect of this misstep.
2. Account charge-off
If you don’t pay your debt as agreed, your lender may eventually give up and charge the account off. The charge-off will appear on your credit reports for seven years.
What to do: Try to pay off the debt or negotiate a settlement. While this won’t get the charge-off removed from your credit reports, it'll remove the risk that you’ll be sued over the debt.
If you don’t pay for an item, such as a car, as agreed, the lender can come and get it, often without warning. A repossession will stay on your credit reports for seven years after the account was first reported late.
What to do: Keep all other bills up to date. Positive information such as on-time payments, along with the passage of time, can start to mitigate the damage to your credit.
A creditor that’s not seeing payment may send or sell the debt to a debt collector. Having an account in collections is a serious negative that stays on your credit reports for seven years.
What to do: Make a plan to pay off the collection once you verify that the collection agency actually owns the debt. That won’t get the mark off your credit reports, but it'll remove the risk you could be sued.
Like other negative marks, the damage fades over time if you don’t add other mistakes on top of it. Paid-off collections factor into FICO 8 credit scores, the ones most widely used in lending decisions. But some newer credit scoring models, such as VantageScore 3.0 and the FICO 9, ignore paid collections.
5. Student loan delinquency or default
Late student loan payments can start to hurt your credit after 30 days for private student loans and 90 days for federal student loans, and those delinquencies stay on your credit report for seven years.
Federal student loans go into default if you don’t make a payment for 270 days. And the government has strong debt-collection powers: It can garnish your wages, Social Security benefits or tax refunds. With private student loans, your lender can term you in default as soon as you’re late, but it has to take you to court before it can force repayment.
What to do: If you’ve paid late but haven’t defaulted, consider switching to an income-driven repayment plan, putting your loan in deferment or forbearance, or asking your lender for a modified payment plan.
If you’ve defaulted on your federal student loans, the government offers three options: Repayment, rehabilitation and consolidation.
What to do: Begin to re-establish credit. A secured credit card or a credit-builder loan can help people build credit when they can't qualify for unsecured credit. And note that credit scores can rebound from bankruptcy sooner than you may think.
If you fail to make payments on your home and the bank seizes it, the foreclosure will be reported to the credit bureaus and the mark will stay on your credit reports for seven years.
What to do: Keep your other credit lines open and pay them on time. You want to build up all the positive payment information you can. Note that the waiting period after foreclosure is shorter than in the past, so keep polishing your credit and you could re-enter the housing market sooner than you expected.
How to rebuild
The good news is, making even a little progress to improve your credit standing can give you better financial options.
Begin to restore your credit by following these tips:
Make all payments on time. Payments have the biggest influence on credit scores, so always pay at least the minimum by the due date.
Try to keep credit card balances below 30% of the credit limit. The second-biggest influence on your score is something called credit utilization, which is how much of your available credit you use.
Look into using tools like a credit-builder or share-backed loan, becoming an authorized user on the credit card of someone with good credit, or getting credit with a co-signer.