How judgments affect your credit and how to deal with it

By: on 2018-12-28
Ask Phil Bradford
How judgments affect your credit and how to deal with it

Judgments about you, ain’t show no good about you.

And, you surely don’t want them to pile up on your credit reports.

Creditors, at times, don’t think from the heart and file a lawsuit against you if you are delaying the debt payments.

When the lawsuit is filed, it needs to be concluded with a suitable judgment from the court, until and unless the lawsuit can be proved as frivolous.

But, once a lawsuit gets a judgment, it starts to get reported on your credit report for at least 7 years, till the judgment gets satisfied!

Them judgments are court decisions, which determine the rightful steps need to be taken regarding the complaint filed against you by a creditor. So, the court can order your wages be garnished, or if things are pretty serious then your assets be seized!

Whatever it is, the court gives the final decisions, which we call as judgements.

How can judgments affect your credit report and credit score?

Since judgments along with bankruptcy and tax liens, fall under the public records section, nearly the whole world can see them.

Believe it or not, credit reports nowadays play a vital role in determining your reputation. Be it in a job interview, getting yourself a scholarship or taking out loans and credit cards, your credit report must give a green signal!

And, a credit report that shows you have filed for bankruptcy and have lawsuits in your name, really don’t carry a nice prospect!

You need to know one thing that records of judgments and lawsuits fall under the category of payment history. And, payment history, in turn, makes up a solid 35% of your credit score. So, you can pretty much say that too many judgments or lawsuits can really bring down your score!

I can’t give you the exact figures as of how much your score gets affected by judgments! But, all I can say is, one single judgment does have the power to cut your score by 10%. And, that’s seriously no joke.

However, you need not worry or get freaked out so much, given the recent times.

Continue reading to know more about how public records will affect your credit profile, as per the new changes brought in by the NCRC (Nationwide Credit Reporting Companies).

Understanding the new rules and NCAP:

In 2015, NCAP (National Consumer Assistance Plan) was formed by the credit reporting companies to provide more accuracy and an easy correction of credit reports.

The NCAP made some notable changes in how public records are displayed on credit reports. Most importantly, creating minimum standards for personally identifiable information and reporting of public records.

Judgments definitely don’t provide enough information about the defendant alone. In such circumstances, many false or incorrect judgments started to appear on the consumer’s credit reports.

But, from 2015, judgments, lawsuits, and tax liens don’t hold much space and importance on credit reports. As a matter of fact, many consumers saw a deletion of tax liens and insignificant judgments from their credit reports. And subsequently, they saw their credit score get increased to some extent.

Moreover, NCAP has decided to give bankruptcy the highest priority among all public records. That’s so, because bankruptcy has a long range of information to provide about the consumer. These names include, how many creditors the consumer dealt with in the past, what conditions led to the filing of bankruptcy, and the consumer’s capability to pay back debts.

Eventually, Experian has already stopped reporting judgments on consumer’s credit reports.

You can pretty well say that under these new rules, you should start to give more importance to bankruptcy over judgments, lawsuits, and other insignificant records.

Still, that doesn’t mean you should ignore a lawsuit against you anyway!

Why you need to take a lawsuit or judgment seriously:

A judgment to a lawsuit, or a lawsuit itself can do you a great deal of harm, if you don’t respond to it in time.

Not to scare you, however, but a pretty serious judgment or lawsuit can actually get your personal properties seized or might even land you into jail.

On top of that if you don’t respond to a lawsuit, then the creditor wins the lawsuit by default, and therefore receives from the court, what we call, a default judgment.

Typically a default judgment has the power to get your wages garnished! And, once this happens the NCRCs start to get more detailed information about you, which they will definitely list on your credit report.

Also, the credit reporting companies can change their terms anytime they want, and only Experian has confirmed about cancelling judgments, while there’s no update from the others!

How to remove judgments from credit reports?

Once a judgment is listed on your credit reports, it’s going to stay on it till the statute of limitations has passed.

Each state has its own statute of limitations and typically a judgment stays on your credit report somewhere between 7 years -10 years.

a The rightful way to clear a judgment, is to satisfy it.

And, the only way you can satisfy a judgment is by paying off your debt in full.

Once the judgment is satisfied you need to request the creditor to file a Satisfaction Of Judgment form with the court clerk.

Once the form gets filled and signed by all the participants in the involved lawsuit, you will have to update it on your credit report. For this you will just have to mail a copy of the form to each of the credit reporting agencies.

b You can also try to vacate the judgment.

To do so however, you will have to take help of a lawyer, as the process is a bit complicated. You will have to fill up a “Notice of Motion to Vacate Judgment”.

But, vacating a judgment has two aspects, of which you need to abide by any one.

One could be that you want to vacate the judgment, because you want to fight the lawsuit!

The other is you want to prove the original judgment as meaningless, by giving the court enough proof that the judgment was made by mistake.

c Prove that the lawsuit is frivolous in the first place.

The way is difficult, and you surely need a lawyer to act for you. You gotta fight the plaintiff and sue him, which means you file a lawsuit against a lawsuit.

That’s pretty deep and complicated! And, if you are not successful in establishing the fact that the lawsuit is frivolous then you will be in a very bad state!

I believe, that’s all I wanted to say about judgments, lawsuits and anything as such.

Do remember by the way, that the best way to avoid all these hassles, is to pay off your debts fast, before the creditor thinks about filing a lawsuit!

Maintain this rule and your credit score will rise! Now, that’s a guarantee!

Last Updated on: Fri, 28 Dec 2018

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