How Does Getting Sued Affect Your Credit?

Getting sued in civil court by creditors claiming an unpaid debt will not affect your credit rating. However, losing the lawsuit and having a judgment issued against you will affect your credit rating for 20 years, in some cases. The length of time a judgment impacts your credit standing is based on the statute of limitations in the state where the judgment is awarded.

Civil Judgments

Civil judgments are court orders that give creditors the right to pursue debt collection through a variety of methods. Common civil judgments that affect your credit are summary and default judgments. The court will award a summary judgment if you present a defense against the creditor's claims, but the evidence is not sufficient for the judge to rule in your favor. If you neglect to present a defense against the claims, the judge will have no choice but to award a judgment by default. Both types of civil judgments have the same negative impact on your credit.

Credit Rating

Your credit rating is an indication of your financial welfare at a particular point in time. Judgments are listed in the public record sector of your credit file. Potential lenders, employers, insurers and other third-party credit issuers consider the presence of a judgment in combination with your three digit credit score when evaluating your credit worthiness. Credit scores are mathematical calculations devised by the three credit reporting agencies that summarize a consumer's credit management. How you pay your bills and the amount of debt that you owe in relation to the amount of credit available to you carry the most weight in factoring credit scores. Other scoring factors are the types of credit that you carry, the length of time you've had credit accounts and recent credit accounts.

Statutes of Limitation

Judgments will affect your credit standing for as long as they are valid in the state where they were issued, or for at least seven years. For example, judgments issued in Massachusetts are valid for 20 years, but judgments in South Carolina are only valid for seven years. South Carolina, and other states, allows judgments to be renewed for an additional seven years. In this case your credit is affected for 14 years. The Fair Credit Reporting Act allows a minimum seven year time frame for judgments to remain on consumer credit reports. If you are getting sued for unpaid credit accounts, check the statute of limitation in your state for the validity of the debt. Every credit account has a lifespan during which the creditor may pursue collection. If the debt is out of statute, you can defend the credibility of the claim based on the statutes and avoid a judgment altogether.

Judgment Collections

Creditors who win a judgment against you have the right to garnish your wages, seize your car, home and other non-exempt property and take money from bank accounts. Each state determines non-exempt status based on property values and specific uses, such as vehicles or tools necessary for trade. Creditors can collect on a judgment for as long as the judgment is valid.