What is a Key Derogatory?
A key derogatory is typically any entry that is both negative and affects your credit scores. You're probably thinking, "But Lee, don't all negative entries affect my credit score?" Surprisingly no, they don't. Let me explain.
|A key derogatory is nothing special.|
Fair Isaac updated its FICO system in 2009 (Yeah, its called FICO '08, but Fair Isaac was a year behind schedule in releasing the update) to better manage derogatory information. Derogatory credit entries for less than $100 have a reduced impact on your credit scores. In some cases (such as the parking ticket mentioned above) these derogatory entries do not impact your credit scores at all. By preventing small and relatively insignificant debts from dragging down your FICO scores, Fair Isaac helps prevent lenders from losing money by refusing to lend to an individual who would be likely to repay what they borrow – plus interest.
Key Derogatory From Experian
Unlike TransUnion and Equifax, Experian has a different method for determining which entries are and are not key derogatories. A negative entry must fall into one of several specific categories for Experian to mark the entry as a key derogatory. A key derogatory from Experian must be one of the following:
This encompasses most, but not all, forms of derogatory entries that may appear on your credit report.
Derogatory and "Key Derogatory" are Synonymous
It is up to the individual credit bureau what does and does not constitute a key derogatory. The negative affect on your credit score is the same regardless of how the credit bureau chooses to label the entry. In this regard, a key derogatory is not any different from a standard negative trade line. Should you file a dispute, you can do so regardless of whether the entry is a key derogatory or a run-of-the-mill credit blemish.
The good news here is that you are the only one who can see what is and is not categorized as a key derogatory on your report. The credit reports that lenders pull are structured differently than consumer reports and do not separate negative entries into "derogatory" and "key derogatory" categories.