A judgment means that a creditor had to take you to court in order to get you to pay a past-due debt. If you have a credit bureau judgment it can affect you in a number of ways. The best thing to do is contact the creditor before the lawsuit and make arrangements for payments of the debt. It may be possible to negotiate some favorable terms with the creditor including paying less than the full balance. Once a creditor has received a court judgment, there are a number of actions he can take to pursue the balance.
Credit Score
A credit bureau judgment can lower your credit score substantially. It is impossible to determine the exact amount your score will be lowered, because each credit bureau has different standards. Judgments will do the most damage during the early years. When you allow time to pass while you continue to pay your other creditors on time, you will gradually see your credit score begin to improve.
Time Frame
A judgment will stay on your credit bureau report for seven years--starting from the date it was paid, not from the date of filing. Once a judgment is paid, it is a good idea to request a satisfaction or release of judgment, which needs to be filed with the county recorders office at the courthouse. This information needs to be updated on your credit report as well. It never helps your situation to have a judgment, but if you pay in full, creditors may view your situation in a more favorable light, especially if the judgment happened four or five years ago and your other credit is in good shape.
Approval/Interest Rate
A judgment can keep you from being approved for other credit products such as mortgages, automobile loans, credit cards or even overdraft protection. If you are approved for any of these products, you will receive a higher rate of interest, which will cost you more money over the life of the loan in terms of the finance charges you will be required to pay. Some lenders may even charge you different loan fees because you are considered to be a risk; this is how they offset the risk of doing business with you.
Monthly Mortgage Payment
A history of judgments can increase your monthly payment substantially. If you are applying for a mortgage loan, a substantial increase in the interest rate, which results in higher monthly payments, could prevent you from being able to afford the property. A credit score ranges from 300 to 850. If your credit score is in the upper tier of this range, you will likely receive a favorable rate for a mortgage. Lower scores can raise the interest rate by two or even three points.
Job Offers
Poor credit can stop you from getting a job offer. A potential employer may overlook accounts that have been paid 30 or 60 days past due, but when they see a judgment, they are less likely to be as forgiving when it comes to offering you a job. If you are disputing the item, there is a possibility that you may never get the chance to present your side of the story.
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