When you’re looking to apply for a loan, lenders place a major emphasis on your credit report. Your credit history includes your amount of debt and payment history, as well as other factors, and lenders look to your past credit behavior to see whether you’ll be a good credit risk going forward. There are some things on a credit report, however, that could discourage a lender from approving you. These “black marks” could make it difficult to get approved for a loan, and could even keep you from achieving certain financial goals. If you’re planning to apply for a loan but you’ve had credit challenges in the past, here’s what you need to know about credit report black marks.
What Is a Black Mark?
Any item that may be considered negative by creditors is often referred to as a “black mark” or “derogatory information.” These items indicate some sort of negative financial behavior, such as failing to pay debts on time, and they remain on your credit reports for an extended time, typically anywhere between seven to 10 years. Some of the most severe derogatory marks include:
Bankruptcy is essentially a legal process designed to reduce or eliminate a consumer or business’s debt — or make it easier to pay off. While it does provide some form of relief, bankruptcy is considered to be one of the most damaging marks to have on your credit report. Chapter 7 bankruptcy will stay on your credit report for 10 years while Chapter 13 bankruptcy will remain for seven years from the filing date.
In the event that a borrower falls significantly behind on mortgage payments, the lender may opt to foreclose on the home. If the borrower fails to pay off the outstanding debt or cannot sell the home via short sale, the property then goes into foreclosure. A foreclosure will remain on your credit reports for seven years.
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When accounts are reported as being sent or sold off to a debt collector. they are considered to be in “collections.” This usually occurs when a creditor is having difficulty collecting payments on a debt. A collections account will typically stay on your report for about seven and a half years from the date it first became late.
Simply put, tax liens are when the government places a lien against some or all of an individual’s assets due to them neglecting or failing to pay a tax on time. Tax liens can remain on your credit report indefinitely, though credit reporting agencies often remove them after 10-15 years. Once you’ve paid off the debt’s balance in full it will take seven years from the date it’s paid for the mark to be removed. However, you may qualify to have the lien removed from your credit reports sooner, depending on the circumstances (this guide can help you determine that ).
Although criminal records aren’t included upon your credit report, civil judgments (such as a civil lawsuit or child support case) are. A civil judgment is a ruling against you in a court of law that requires you to pay damages (typically in the event that you lose a case or neglect to respond to a lawsuit). A civil judgment stays on your credit report up to seven years.
What You Can Do About It
While derogatory marks can cause your credit score to take a major hit, they won’t keep you down the entire time they’re on your report. Maintaining good financial habits and keeping the rest of your credit in good health can help you build things back up. As negative information becomes older, it tends to have less of an impact on your credit scores, provided you have other current positive credit references. Paying down high credit card balances and keeping your debt usage ratio low, and making your payments on time are all things that
can help you build your credit.
It’s also a good idea to get your free annual credit reports from each of the three major credit reporting agencies to check for inaccuracies and to generally stay informed. Checking your credit scores regularly can also help you track your progress. There are many ways to get your credit scores for free, including on Credit.com .
While it might be hard at first, it is possible to return to good financial standing with a black mark on your credit report. Provided you strive to maintain good credit behavior, you should start to see your credit score start to inch upwards and your chances of securing a loan increase. Not only that, but the habits you develop during this period can hopefully help you avoid another derogatory mark in the future.
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Leslie Tayne, Esq. is a consumer and business debt-related attorney and advisor. She founded Tayne Law Group, P.C. concentrating solely in debt resolution and alternatives to filing bankruptcy for consumers, small business owners and professionals. In addition, Tayne Law regularly consults and advises on debt management related issues. Her book, Life & Debt. shows how learning to embrace your debt can help you not only like it, but love it. More by Leslie Tayne
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I am slowly working my way back but now I am old in a wheelchair and on social security not easy finally back in the low 700’s but the bankruptcy will haunt me forever and I have very limited buying power. It is really unfair that I am judged by circumstances beyond my control but c’est la vie I am still waiting to see people go to jail for that fiasco.
Like both of you we are in the same boat. I did do a deed in lieu yet no matter how much I fight it remains as a foreclosure.
As to losing everything most are probably half or more of 92 + million with no jobs because we lost our businesses, years of equity and our credit.
The banks got saved, only to keep us in a credit nightmare and not hired because WE did something wrong?
The worst thing they did was save the banks in that way. At least have the funds pass through a mortgage pay off for those who had their homes for years cared for and updated, etc.
America lost with the save the bank deals. throwing families out of their homes. Most small or upstart businesses used their equity to start it or keep it going as we were told time and again things are improving?
I wish the best for everyone in the same situation but I am getting too old now to get back to where I leave something for my family.
Shame on our system and shame on the reporting nonsense and fallacies especially with all so many went through.
I am the victim of mortgage fraud. Several years ago I sold my house to an investor, little did I know, he kept it my name as a Family Trust and was making payments on time. When he got caught, the Securities Commission appointed a receivership & stopped all transactions with the 38 properties he had bought for forensic examination. Well, they have not paid the mortgage (still in my name) in months. I don’t know what to do.