How Much Does a Judgment Hurt My Credit?

Creditors can seek a judgment against you for failing to pay what you owe. A judgment can significantly hurt your credit profile. If you have a judgment on your credit report, getting it removed is important so that you can start rebuilding your credit.

What is a Judgment?

A judgment takes place when you do not pay your bills and your creditor sues you. When the lawsuit is filed in the local court system, you have to appear in court or a default judgment will be entered against you. On your court date, the judge will hear the evidence against you and unless you can prove that you did not accumulate the debt, the creditor will win the case. Then the creditor can use the judgment to collect from you through a wage garnishment or a bank levy.

Getting to a Judgment

Before a creditor files a lawsuit for a judgment, several steps occur. For example, you typically have to be at least three or four months late on your payments before the creditor files suit. If you get to 30 days late on a payment, it can hurt your credit by as much as 110 points, according to CNN Money. By the time the account gets to 90 days late, it hurts your credit by as much as 135 points. Then when the actual judgment is placed on your record, it could drop your score by 50 to 150 points, depending on how high your score was to begin with.

Judgment Section

Besides the impact on your credit score leading up to the judgment, the judgment itself also damages your credit. The judgment stays on your credit report for seven years from the time that it is entered against you in court.

Removing the Judgment

If you have a judgment on your credit report, try to have it removed. When you pay off the judgment, you may be able to negotiate with your creditor to get it removed. In some cases, the judgment is still not removed. If you check your report and an old judgment that is satisfied is still on your report, you can dispute the item with the credit bureaus and get it removed.

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What Happens to a Credit Score When Co-Signing?

Debt co-signing is a way for those with poor credit to get approved for loans or credit cards by having someone with good credit back their debt obligation. The person with good credit, or "co-singer," agrees to pay the debt if the person with poor credit fails to pay, which gives creditors an extra guarantee that they will be paid. Co-singing can have several effects on credit scores for the co-signer and the person seeking the loan.

Credit of Borrower

Getting a debt co-signed can be beneficial to the credit score of the person with bad credit in the long term. When you have bad credit, it can be hard to get a loan, but paying off debts faithfully is a way to build credit. Getting a cosigner can be a way to secure a loan to start making payments toward building up credit. The danger for the borrower is that co-signing implies that they may not be financially stable or responsible enough to pay for the loan themselves. Borrowers that get cosigners often start off with good intentions but end up missing payments so the debt falls to the co-signer to pay. If there is no adequate communication between the borrower and co-signer, payments may be missed or late, which can hurt the credit of both parties.

Credit of Co-signer

Cosigning a debt can harm the credit of the co-singer. Any co-signed debt is considered to be part of the co-signer's total debt load, which may harm credit after the loan is issued. Another problem is that co-signers often end up paying for some or the entire amount borrowed by the person they sign for. If the co-signer expects the borrower to be responsible and pay for the loan, they may unexpectedly find themselves unable to pay for all of their debts, which can harm their credit. While the borrower is likely to have bad credit to begin with, missed payments will have a more dramatic impact on the credit of the co-singer.

Considerations

Co-signing is an inherently risky practice, which yields little financial benefit to the co-signer. From a purely financial standpoint, it is best never to co-sign a loan if your goal is to protect and increase your credit score. Most people co-sign loans for personal reasons, such as to help a friend or family member through a tough time. Co-signers should be aware that there is a good chance they will end up paying for some or all of the cosigned debt. Co-signing can, however, help borrowers with poor credit establish their credit, especially if they have a short credit history and are otherwise financially responsible. For instance, recent college grads often need loans but have short credit histories despite good income potential. It should also be noted that co-singing can introduce tension into personal relationships, which can cause more harm than the loan is worth to either party.

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How Long Can a Creditor Report on Your Credit Report After Bankruptcy?

After you file bankruptcy, you generally are not responsible for any of the debt you owed before you filed. As a result, your credit report will reflect your bankruptcy for a number of years, so that future creditors know that you failed to pay your previous creditors. The length of time that a negative item remains on your credit report is fixed, and it depends on the type of delinquency you committed.

Negative Accounts

If your financial condition was such that you had to file bankruptcy, you most likely missed one or more payments to your creditors before you actually filed bankruptcy. Each time you are 30 or more days late in making a payment, your creditor will report this delinquency to the credit reporting agencies. Delinquencies such as late payments remain on your credit report for seven years.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy remains on your credit report for longer than a simple missed payment, due to the severity of your delinquency. In a Chapter 7 bankruptcy, you are not only relinquishing all of your debt, you are not even offering to make any payments. As a result, your creditors can report your Chapter 7 bankruptcy to the credit reporting agencies for 10 years. Credit reporting agency Experian states that while the negative effect of your Chapter 7 bankruptcy will diminish over time, the bankruptcy will continue to appear for the full 10 years.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy does not appear on credit reports for as long as Chapter 7 bankruptcies. This is because a Chapter 13 bankruptcy reflects a good faith effort on your part to pay your creditors at least some of what you owe. As a result, your Chapter 13 bankruptcy should drop off your credit report seven years after your file your original petition.

Accuracy of Your Credit Report

By law, you cannot remove negative information from your credit report if it is accurate. However, you do have the right to ask for an investigation of items on your credit report that you think are inaccurate. After receiving your written notification, a credit reporting agency has 30 days to perform an investigation and provide you with a written report of the results, including a free copy of your credit report. If you find inaccurate items on your report, you should be able to have them removed using this process.

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How to Increase Credit Rating

Before a lender grants credit or loan money, the lender must access credit records. By reviewing a credit report, lenders can determine the probability that the loan or line of credit will be repaid in full. The better the credit score, the more likely you are to get approved for the credit and loans applied for. Your credit also can make a difference when applying for other such necessities as employment or renting an apartment. Improving your credit rating can save money in interest and ensure that no lender, employer or apartment manager turns down your applications.

Instructions

1

Pay down as much credit card debt as possible. According to CNN Money, the amount charged on credit cards can hurt a credit rating---even if payments are made on time. Carrying a high balance gives a high "debt utilization" that, in turn, results in lower credit scores.

2

Ask for a credit limit increase on credit cards. If you can't afford to pay down credit cards, yet have a history of on-time payments, the credit card issuer may be willing to raise the credit limit. A higher credit limit reduces debt utilization and increases credit scores.

3

Dispute any collection accounts or negative entries on a credit report that you don't recognize. The Federal Trade Commission recommends that all individuals regularly review their credit reports for errors. Should you find an error, notify the credit bureaus and request a full investigation. If the creditor reporting the data cannot verify it, the negative information must be removed from your credit file---increasing credit score. (See References 2.)

4

Write goodwill letters to each creditor reporting late payments to the credit bureaus. Late payments not only have a significant negative impact on credit scores, a history of late payments shows future lenders that you cannot be trusted to properly manage debts. (See References 3.) Write a letter to each creditor reporting the late payments and request that the notations be removed. Cite any positive aspects of the account, such as the fact that you've been a customer for five years or that you usually make on-time payments, when making the request.

5

Pay creditors on time. Making timely payments boosts credit scores and shows any company or individual reviewing your credit report that you possess good debt management skills and are an excellent lending risk.

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Facts About Free Credit Reports

Every consumer has the right to review her personal credit history. Regrettably, some people never order their credit report and are thus unaware of possible inaccuracies. There are several ways to acquire a report, but instead of paying for it, learn how to review your report from all three bureaus for free.

What Is a Credit Report?

Credit reports are documents that reveal your entire credit history. Opening a credit account qualifies you to receive a credit report; from this point forward, every credit card, auto loan, mortgage or other loan you acquire is listed on your personal credit report. Compiling your credit accounts into one document helps creditors determine if you're worthy of new credit. Lenders can check your credit report and review your payment history and outstanding balances. Based on this information, they either approve or reject your application.

Benefits of Checking Your Own Credit Report

Credit reports don't only benefit lenders and creditors; it's vital to check your own free credit report at least once a year. This keeps you aware of your credit standing and if creditors report inaccurate information you can catch their mistake early and dispute the remark. What's more, identity theft is prevalent and fraudulent accounts on your credit report can lower your FICO credit rating and result in credit rejections or higher interest rates.

Ways to Get a Free Credit Report

There are three ways to get one free credit report from all three credit bureaus. Annual Credit Report provides consumers with free credit reports and you can request your report online by visiting the agency's official website at Annualcreditreport.com. If you prefer to mail a request, contact the agency at: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Complete the request form before mailing it. You can also opt to call the agency's toll-free number and request a report: 1-877-322-8228.

Warning

Different companies claim to provide consumers with a free credit report. However, these advertisements are misleading when they require you to enroll in a credit monitoring program or service. Be cautious when ordering a free report from a company other than Annual Credit Report. According to the Federal Trade Commission, Annual Credit Report is the only agency authorized to provide free reports to consumers.

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Who Uses Experian to Check Your Credit?

Effective credit management is critical to financial planning. Interested parties frequently analyze your credit report to gauge your ability to handle credit. Experian is one of the primary suppliers of this information.

Identification

Experian, TransUnion and Equifax are the three main consumer credit reporting agencies. Experian compiles information related to the type and amount of debt that you carry. Further, the company documents your payment history. Experian generates credit scores that evaluate your debt management capabilities.

Features

Creditors review Experian debt statistics prior to extending credit. Banks then decide to approve your credit application and set interest rates. Credit card companies, mortgage providers and automobile loan enterprises review Experian information before agreeing to terms.

Considerations

Insurers, landlords and employers also analyze your Experian profile as a means of judging your character. These parties feel that financially stable consumers are less likely to commit fraud.

Strategy

Order a copy of your credit report prior to taking out loans for major purchases. You are entitled to one free report through Annualcreditreport.com, which includes information from Experian. Verify information and dispute errors.

Risks

Third parties, such as employers, that access Experian credit information as documentation for your personality may expose themselves to lawsuits.

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The Credit Implications of a Short Sale

When you have trouble with your mortgage payment, one of the options that you have to consider is a short sale. Instead of going through a foreclosure, a short sale allows you to sell your property and move out. While this may be a more attractive option than foreclosure, it can also have negative effects on your credit report.

What Is Short Sale?

A short sale is a process in which you try to sell your house for less than what you owe your mortgage lender. You take care of the marketing with the help of a real estate agent. When a buyer makes an offer on the property, you have to accept it and then pass the offer on to the mortgage lender for approval. If the lender accepts the offer, the buyer purchases the property and then you move out. The mortgage lender can forgive the rest of the mortgage balance or try to come after you for it.

Long Lasting Impact

Going through a short sale can have a long-term impact on your credit history and your credit score. According to the "Wall Street Journal," a short sale can stay on your credit report for as long as seven years. This means that any time you apply for any financing over the following seven years, the potential lender will see that you have a short sale on your record. The short sale will likely show up as "settled" on your credit report, which lenders look unfavorably upon.

Credit Score Damage

When you go through a short sale, it will have an immediate impact on your credit score. According to CNN Money, your credit score can be lowered by as much as 160 points by going through a short sale. Your credit score is one of the most important numbers that you have in your financial life. While it is not a permanent deduction, it can take some time before you can build it back up to a level that will help you get financing.

Buying Another House

Even though a short sale can damage your credit, it is typically not as bad as a foreclosure when it comes to buying another house. Fannie Mae actually allows potential buyers who have been through a short sale to qualify for a mortgage in only two years after the completion of the transaction. By comparison, you have to wait at least five years before you can get a mortgage with a foreclosure on your record. This gives you an incentive to use a short sale instead of a foreclosure.

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