“Key Derogatory” Accounts and Your Credit Score

One of the most important aspects of getting a home mortgage loan is your credit score. In fact, mortgage lenders have much tighter standards than they did a couple of years ago, due to the credit market crunch. Even incentives and threats from Washington have not worked to get mortgage lenders approving loans. This means that your credit score is even more important than ever and, once you are approved, your score can mean the different between a great interest rate and a poor interest rate — a difference that could cost you tens of thousands of dollars over the life of your home loan.

Key derogatory accounts and your credit score

One of the most important items to look for on your credit report is what is known as a key derogatory account. This is an account that has gone into collections. Your original creditor is no longer servicing the account. It may be an account that you have forgotten about, or became delinquent on for some other reason. If the amount is low enough, you can pay it off and improve your credit score dramatically. Church of Cowherd points this out about key derogatory accounts:

Not all debt is created equal. One of the best ways to help your credit score (and your finances) is to get rid of any key derogatory accounts that might be lurking on your credit report. You can check your credit report, and get one free credit report from each bureau every year, at annualcreditreport.com.