How Long Does It Take to Recover From Derogatory Credit?
Derogatory credit refers generally to items which count against you for your credit score. Minor credit items such as a single late payment may not show up at all on a credit report. Say you paid two days late. You may see a late fee on your next bill, but usually you receive consideration as current as of the next billing statement in a report. Not always. Say you forgot to pay the bill this month and you get your next billing statement and it shows you owe two months of payments and a late fee. If paid immediately and well before your next billing statement, you might be treated as less than 30 days late. The period late generally runs from the due date to the payment date. Waiting until later to make the payment at the due date makes you 30 days late on the first payment. A ding, but not a major disaster. Have multiple accounts go 30 days late or accounts go 60 or 90 days late and your credit score starts dropping like a rock. But these are still minor impacts from which you can recover.
Major credit items affect you for a number of years. Getting back into the mortgage game after a foreclosure, bankruptcy, short sale or other such event becomes a challenge. Below is a general matrix for those significant credit events. If you read Winning Mortgage, Winning Home, you will be more familiar with avoiding these in mortgage planning and avoiding default. While conventional/conforming primarily references Fannie Mae and Freddie Mac qualifying, many, if not most all, bank lenders or private lenders will stick close to these requirements or perhaps be more stringent.
