Sooner or later, everyone gets derogatory marks against them in some form or another. It is an inevitable part of life. When it comes to credit, no one is perfect forever. Things happen. The unexpected strikes. And luck turns from good to bad in a heartbeat. Before you know it, your spotless record isn’t so spotless anymore. If you don’t react correctly, things can spiral out of control and your credit ends up as bad as it once was good. It is hard to come back from that — hard, but not impossible.
The first thing you need to do is learn everything you can about derogatory marks. They usually come in the form of red flags on your credit report. If you want to avoid a world of hurt caused by these unfavorable marks on your record, obtain a free credit report and read on:
Always Check Before a Major Purchase
You would be correct in believing that a bathroom remodel could increase the value of your house before a sale. But it will do nothing for you if you can’t get the necessary loan or financing. Don’t wait until your application is declined before you check to see your credit situation. And don’t just assume that everything is okay because you haven’t heard anyone give a negative report.
Reporting agencies don’t just contact you to let you know about derogatory remarks on your report. That will only happen if you are signed up for a particular kind of credit monitoring service. If you are not proactive, the first sign of a problem will be when you are declined. Before engaging in any kind of major purchase, run a credit report on yourself and look for the kinds of derogatory marks that cause creditors to shy away.
It Is Not Just About Missed Payments
Derogatory marks are not just about missed payments. Did you know there was such a thing as slow payments? Slow payers are habitually late with their payments, but still manage to get those payments in before they go to collections. Creditors hate slow payments for the same reason that you hate it when people are habitually late paying you what they owe you.
Being slow with payments does not automatically leave a mark on your credit report, You can’t be reported to the credit bureaus until you are over 30 days in arrears. That said, late payments add up in the form of late fees. These fees make it harder to get caught up. Rest assured that the moment creditors can report you, they will. Those types of derogatory marks can be hard to overcome. Because no one wants to take a chance on a slow payer. It is only a matter of time before you start missing payments altogether.
As with most types of derogatory marks, the best way to overcome them is to pay off your debts. Creditors will find it a lot easier to look past derogatory marks when they see that you are able to pick yourself back up and do the right thing.
Targeted Credit for Rebuilding
Ironically, one of the best things you can do to erase poor credit is to use credit in a targeted way. You will almost always qualify for some type of credit card even if it does not have the best of terms. The terms are irrelevant if the card is used in the right way. Use it for recurring bills you always manage to pay on time. Then pay it off by the end of the month. Only use it for those things you normally pay such as utility bills.
When you get a little better at paying off your card, use it for groceries and other life staples. Only use it in situations where you could pay cash if you wanted to. Then, put that cash into paying off the card as quickly as possible. Not only will your credit score start to climb, you will also get some nice cash-back rewards that you would have never gotten with cash payments alone.
Derogatory marks on your credit are bad, but not the end of the world. Check your credit report before major purchases. Be aware of more than missed payments. And use targeted credit to rebuild your credit worthiness to healthy levels.