How to Clear Up Derogatory Credit

by Laura Woods
Clearing up derogatory credit takes time.

Having derogatory marks on your credit report can be frustrating. Notices of late payments, delinquent accounts and other less-than-flattering financial instances can lower your credit score and make it more difficult to get a loan and a competitive interest rate. Simply paying off past-due debts doesn't erase the instances from your credit report, but is definitely the first step toward starting over. Changing your current financial behaviors to ensure that you pay bills on time is a good step to avoid any new derogatory marks on your credit report.

Request a free copy of your credit report from any of the three reporting agencies at

Review your credit report to identify delinquent accounts and check for mistakes. It’s fairly common for creditors to mistakenly list the same delinquent account on your credit report multiple times. The Credit Karma financial website reports that as many as 25 percent of credit reports could contain serious errors.

Draft a dispute letter to send to any credit bureaus reporting an error. Provide supporting documents and a copy of the credit report with the error clearly marked. Follow up if you don’t hear anything back within 30 days.

Pay off the balance on all your delinquent accounts. Start with the most recent accounts and work your way back, as the current charges have the greatest impact on your credit score. If you’re planning to apply for a loan in the near future, it may actually be best to wait to pay off older debts until after you’ve received the loan, as this turns them into a current collection. Collection accounts commonly report once the account is created and then never again, so when you pay it off the debt, the account reports current information again. While having a balance paid in full is positive, it's not so great that an old collection is reporting as a current collection.

Keep paying your bills on time to boost your credit score. Derogatory marks typically stay on your credit report for seven years. Fortunately, positive information, such as paying bills on time, can stay on your credit report forever.

About the Author

Laura Woods is a Los Angeles-based writer with more than six years of marketing experience. She has a Bachelor of Arts in communications from the University of Pittsburgh and an MBA from Robert Morris University.

Photo Credits

  • Buccina Studios/Photodisc/Getty Images