Derogatory Information

WHAT IS ‘Derogatory Information’

Derogatory information is negative information on a person’s credit report that can be legally used to turn down a loan application.

BREAKING DOWN ‘Derogatory Information’

Derogatory information is any reported credit information that can be used to legally deny an individual a loan. As a general rule, derogatory information remains on a person’s credit report for seven years; but there are exceptions, including bankruptcies, which can remain for 10 years.

Forms of Derogatory Information and Your Credit Score

Derogatory information can refer to a variety of items reported to the credit bureaus from credit card companies, lending institutions and mortgage providers.

The most common form of derogatory information are late payments. A creditor can report a payment late at 30 days past due, and then increase every additional 30 days as the delinquency continues.   

Collections are another kind of commonly occurring derogatory information. After an account passes 120 days overdue, a creditor may sell it to a collections agency. This will add additional derogatory information to a credit report on top of the already reported late payments.

Foreclosures are also listed as derogatory information on an individual’s credit report. Foreclosure refers to the legal process through which a lender seizes and sells a property after an owner is unable to make full principal and interest payments on his or her mortgage.

Derogatory information also includes bankruptcy, tax liens, loan and credit defaults and civil judgments.

Derogatory information in your credit history can greatly impact your credit score, and make it difficult to get new lines of credit, get approved for a loan or qualify to rent an apartment.  Though some lenders may still extend a line of credit to an individual with derogatory information on their credit report, it may include higher interest rates or fees.

If you find yourself with derogatory information on your credit report, it is important to review your credit report and look for errors. The report may still include derogatory information that should have expired or list a paid off account as unpaid.

Derogatory Information and Consumer Rights

Derogatory information refers to only legal reasons to deny credit that appear on a credit report. Various federal laws and statutes protect consumers from unfair denial of credit. Enacted in 1974, the Equal Credit Opportunity Act protects individuals from discrimination, stating creditors cannot consider a consumer’s race, color, national origin, sex, religion or marital status in deciding whether to approve their credit application. Financial institutions also cannot deny credit based on age, nor because the applicant receives public assistance.