I'm Being Sued: How Will This Affect My Credit?

If getting sued doesn't cause enough to worry about, apart from the legal fees and time involved, you should be aware that a lawsuit may also impact your credit score. While not all lawsuits impact your score, they can significantly lower your credit score. If you need help with a lawsuit or understanding how the lawsuit might affect your credit, contact an attorney in your area for legal advice.

Credit Reports

The three companies that maintain consumer credit reports: Experian, TransUnion and Equifax, collect information from creditors about each individual lender. Whenever you engage in a transaction involving credit, such as taking out a credit card or applying for a lease, this information can wind up on your credit report. These companies use this information to create credit scores that represent how good or bad a consumer has handled credit in the past.

Lawsuits

A lawsuit is a civil legal action brought about when one person or organization, called a plaintiff, asks a court to award damages because it claims that another person, called a defendant, has caused the plaintiff injury or damages. Civil lawsuits range from small claims cases involving low-dollar amounts to massive class-action lawsuits involving thousands of people and billions of dollars. In general, only lawsuits that involve you and your creditors will impact your credit report.

Debt Lawsuits

The most common type of lawsuit that impacts your credit comes when a creditor sue you for an unpaid debt. If, for example, you fall behind on your mortgage payments and your lender forecloses on your home, this impacts your credit report because it involves your ability to pay your creditors. How much a lawsuit affects your credit score varies based on different factors such as the company calculating the score, but Yahoo Finance reports that if, for example, you have a foreclosure on your credit report, you could see your score lower by between 85 and 160 points.

Other Lawsuits

Even if you don't default on your loans and are not sued by your creditors, your credit score can still be affected by a civil lawsuit. If, for example, you get sued in small claims court by your landlord and your landlord wins, the landlord wins a judgment against you. The landlord then becomes a judgment creditor, and that judgment can get listed on your credit report and impact your credit score.