When you experience sudden job loss or you just don’t know how to properly manage your finances, this can result in bills going unpaid. Whether it’s a credit card balance or a mortgage loan, unpaid bills will go into collection sometime in the future.
Collection companies have different tactics to make you pay for your defaulted bills, such as making phone calls and sending letters to your home.
If none of the strategies work and they still cannot make you pay for your past-due debts, they could eventually take you to court for a legal remedy and a win a judgment against you. When this happens, they can have something to pursue: a lien can be filed against you so they can collect whatever it is in your possession (your home or other properties you have); they can even go after the money in your savings or checking account, or garnish your wages.
How long will a judgment stay on my credit report?
A judgment on a credit report usually stays for 7 years. But how does a judgment get in your credit report? A judgment, just like a tax lien, a foreclosure, and a bankruptcy, is considered as a public record. Public records are legal documents issued by your local county, the state or the federal government, which can be viewed by the public. Public records are reported to the credit bureaus, Equifax, Experian and Trans Union, which means that it will be included in your credit report.
Why does a public record need to stay on your credit report that long, anyway? Keep in mind that your credit report contains your credit history, which means that the information in it doesn’t only contain the current information about you, but also information about your past. After seven years, the judgment should automatically be dropped from your credit report. If not, you can contact the credit reporting company and ask for details of why the judgment still appears on your credit history. This means one thing – it’s important to review your credit report regularly to make sure that there are no judgments that are not yours or that yours has already been dropped. Always remember that when a judgment is removed, it can significantly boost your credit again.
Things you can do to help prevent judgments from hurting your credit
In most cases, it’s easy to prevent judgment from happening to you. First, don’t avoid your creditors when they contact you regarding your unpaid debts. Whatever your reasons are, you need to face them professionally and explain your side. Try to make some arrangements with your repayments rather than totally abandoning your debt and forcing debt collectors to pursue you. Most creditors will understand your situation and they are generally willing to work with you instead of handing debt off to collectors to do the job, and having them file for a judgment against you.
Once you make repayment arrangements, be sure to start paying your debts in full and as fast as you can. You should know that once you have fully paid your debt, you can contact the creditor and request they remove the judgment from your records. While the judgment will automatically drop from your credit after seven years, it’s more practical to request it to be removed earlier. If you have negotiated with the creditors they may consider early removal; doing this will help strengthen your credit position, which is very important if you will be applying for a loan or a line of credit in the near future. Again, you need to check your credit to make sure that the judgment has already been dropped from your report.
If you have been paying your bills on time and you are absolutely sure that there are no court records filed against you, yet judgments appear on your credit report, you need to dispute it right away. Sometimes, errors happen and show up in your credit record, so it would be wise to keep an eye on the details in it. If it’s a wrongfully reported judgment, contact the bureau to make corrective actions and have that negative item removed from your credit.