What Does Key Derogatory Mean on My Credit Report?

A collection account is categorized as a key derogatory.

A key derogatory on your credit report is any account that has gone into collections. These entries have the potential to severely damage your credit rating and prevent you from being approved for credit and loans in the future.

Facts

Although "key derogatory" sounds as if the entry is of special importance, it is merely a classification used for collection debts. All collection accounts will be categorized as key derogatories.

Function

Derogatory entries on your credit report serve as a warning to future lenders that you have not been dependable with paying your debts on time in the past.

Time Frame

Derogatory accounts will remain on your credit record for seven years from the date the original debt was first classified as 180 days past due. Some collection agencies may remove derogatory accounts early in exchange for payment.

Significance

A key derogatory will only have a negative effect on your credit score if you owe more than $100 to the creditor. Old debts below this threshold are not taken into consideration when your credit score is calculated.

Considerations

Regardless of the amount of a derogatory debt on your credit report, some lenders, such as mortgage lenders, may require the debt to be paid before you will be eligible for a loan.

References

• CardReport: The Fair Credit Reporting Act (Section 605)
• CNN Money: Your New and Improved FICO Score

Resources

• Federal Trade Commission: Credit Repair--How to Help Yourself
• Americans for Fairness in Lending: Credit Reporting and Scoring