What is a derogatory remark on a credit report?

• A. A warning sign of credit abuse, such as a collection notice.
• B. A positive note indicating on-time payments.
• C. An entry showing a high credit limit.
• D. A routine inquiry by a lender.

Answer: (A)

A derogatory remark on a credit report is negative information that shows you had problems paying debts. It serves as a warning to lenders that past credit behavior could indicate a higher risk. A collection notice is a classic example because it means the creditor has given up trying to collect directly and has turned the debt over to a collection agency, signaling nonpayment or serious delinquency.

In contrast, a note about on-time payments would be positive, not derogatory. A high credit limit is simply a feature of the credit line and doesn’t reflect past payment behavior. A routine lender inquiry is normal activity and doesn’t indicate negative credit history.