What Does Key Derogatory Mean When It Is Listed on My Credit Report for My Home?

When you apply for a home loan, the lender makes an inquiry of your credit history to determine the risk of loaning money to you. "Key derogatory" accounts listed in your credit report can prevent you from being approved for a home loan.

Definition

Key derogatory information can include bankruptcy, foreclosure or closed credit accounts.

A key derogatory account is a report of a loan or line of credit that you did not pay and was subsequently sent to collections. "Derogatory" refers to negative information, and "key" implies that the information was significant enough to make a major impact on your credit score.

Pay It

Paying off key derogatory accounts increases the chance of getting a mortgage.

You can improve your credit score dramatically if you call the holder of the account and pay the debt. Paying the full amount will have a slightly better impact than settling for a lesser amount, but settling is certainly better than allowing the debt to remain unpaid.

Or Don't Pay It

If debt is unmanageable, seek credit counseling and avoid incurring further debt.

In terms of your credit score, the damage is already done; the score will not get lower simply as a result of the debt getting older. After the statute of limitations for debt collection expires in your state, you can request to have the information removed from your credit report.