In Part II: Judgments on Your Credit Report, we talked about how to avoid judgments on your credit report if you have been late making payments. But if you already have judgments on your credit report, the best thing you can do is pay them off as soon as possible.
In most cases it, even if a judgment is paid off, the judgment will most likely remain on your credit report for seven years.
Not only must you settle the judgment, but you also must be sure that it is recorded properly as paid. You will receive some paperwork entitled “Satisfaction of Judgment” or a dismissal (order to vacate judgment). If you do not receive this paperwork, call the courthouse where the action was recorded and obtain a copy of the order. This will likely require proof of payment. Once it is recorded, make sure the appropriate credit bureau knows it has been paid. Follow up by checking your credit statement.
If you do not pay the judgment, your bank accounts might be seized and wages garnished.
A judgment is one of the worst thing that can happen to your credit score. Judgments stay on your credit report for seven years from the time they are paid. If you do not pay judgments on your credit report for three more years, they will be on your credit report for ten more years! To give you some idea of how damaging a judgment can be, consider what it looks like when it falls off your credit score. I’ve seen scores jump 30 or 40 points once a judgment falls off!
If you have judgments on your credit report, time to embark on a plan to rebuild your credit. The best advice is to start rebuilding now. A lot of people with bad credit think that time will heal their wounds. Because they have poor credit, they think they cannot get credit. They simply stop using credit, thinking that the problem will solve itself when the judgment falls off the credit report.
But credit-scoring bureaus place more emphasis on recent behavior than on past behavior. The also consider no credit activity just as bad as poor credit. If they do not have any information by which to judge your recent behavior, they simply assign you a poor score.
If you start now—today—you are one day closer to a score of 720.
When you have judgments on your credit report, the credit-scoring bureaus want to see that you have learned a lesson from the financial mishap. By wiping your hands of credit or ignoring the problem, the credit-scoring bureaus are unable to make this judgment call. They have no proof that you can indeed manage credit responsibly. And this is why I say you must start the process today!
If you have judgments on your credit report and want to learn how to improve your credit score, be sure to sign up for my no-cost teleseminar and receive all sorts of free goodies about recovering from financial mistakes.
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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.
Would file for bankruptcy before judgments or court proceedings start is
a better way to start building credit. Where I just show a bankruptcy and no judgments.
Great. I had no idea. I have a judgment and I just got a credit card to start rebuilding my credit so reading this article let me know I am on the right track. Thanks.