In Part I: Judgments on Your Credit Report we looked at the ABCs of judgments. This week, let’s talk about how to avoid judgments so that your credit score doesn’t suffer unnecessarily.
Obviously, the best way to avoid judgments on your credit report is to pay your bills on time. But once you have been sued, you have only one course of action to stop the judgment: appear in court with proof that the lawsuit is not valid.
That being said, there is one great way to avoid judgments on your credit report: Call the creditor!
Like I said, paying your bills on time is the best way to avoid a judgment. But if you are having trouble paying your bills on time, the first thing you should do is pick up the phone and start negotiating with your creditor. The golden rule for all debt is to take it head on and not bury your head in the sand.
Burying your head in the sand might be the least threatening way to respond to a problem, but it is not the most effective. If you avoid the creditors’ calls, they will have no recourse but to file a claim against you.
Especially in today’s economy, reaching out to the companies that are trying collect debts from you can be beneficial. Creditors are afraid that you will declare bankruptcy (the bankruptcy facts show bankruptcy on the rise in tandem with a struggling economy), in which case they would receive no payment from you. Creditors would rather receive something than nothing. As well, they want to avoid court. They would much rather be paid for their services than face the trouble and expense of courtrooms and lawyer fees.
The sooner you begin the process of communicating with creditor to avoid having judgments on your credit report, the better. No matter how impersonal your relationship is with the water company or the cable provider, it will likely be a much friendlier relationship than that you will have with the collection agency. If at all possible, work out a payment plan early and avoid the harassment of the collectors.
Okay, so what should you do if you already have judgments on your credit report? Join me next week for Part III!
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A “credit card score” is a letter grade that reflects whether your credit card habits are helping you build credit or causing you to have bad credit: An “A” credit card score is excellent; an “F” indicates that you likely have bad credit. The lower your credit card score, the more likely you have bad credit and need to make immediate changes to your credit card behavior.