Civil Judgment

Will a civil judgment affect my credit?

My question relates to a civil judgment and potential impact on my credit score. I was involved in an auto accident and have been sued by the other driver. My insurer has provided me with legal representation and the damages claimed by the plaintiff are small (the dispute centers primarily on the replacement value of his car and the max of the claim is around $5K) and would be well within my insurance coverage amount. I am planning to buy a home in the next few months so I am watching my credit score closely and was wondering if a civil judgment, that is paid by my insurance company, would have a negative impact on my credit score? Thanks.

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  • Review how a civil judgment lowers your credit score.
  • Consult with an attorney, when facing a legal judgment.
  • Try to settle your case, before a judgment is entered against you.

Having a civil judgment against you will likely damage your credit score, but how much it will reduce your score greatly depends on the other items appearing on your credit report. For example, if you have numerous accounts reporting long positive payment histories, this single blemish on your report should not be detrimental to your credit profile. However, if you do not have a substantial positive credit history to balance out the negative impact of the judgment, your score could drop significantly.

I am glad that you have legal representation in this court case. You should work with your attorney to determine the best course of action available to you under the circumstances. Explain to your attorney that you are planning to purchase a home, and that you are worried about a judgment damaging your credit score. He may decide that settling the case, thereby preventing a judgment altogether, is the best course of action. Also, in some states, if a judgment is paid before it is recorded, it will never become part of the judgment records, and will therefore not appear on your credit report. Once a judgment is entered, you may be able to negotiate with the judgment creditor (the Plaintiff) to file a motion to have the judgment expunged as part of the settlement agreement. These last two options are much more difficult and time consuming that simply settling with the Plaintiff before the judgment is issued. Unless some fact that you do not mention in your question precludes settlement, I think you should discuss settlement options with your attorney before a judgment is entered against you. A judgment will almost certainly damage your credit score, so if a judgment can be avoided through a settlement, I would encourage you to consider that option.

To learn more about credit and credit scoring, visit the of Bills.com Credit Solutions and Resources page. See also the resources Collections Advice and Wage Garnishment and Liens & How to Resolve Them to learn more about your rights and liabilities.

Also, since you mention that you are planning to buy a home, you can read more information at the bills.com Home Purchase page.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

68 Comments

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  • SM
    May, 2012
    sanaa
    I was sued by a credit card company. My bank account was frozen and they took $1,000. I still owe about $1,800 and now I have judgment placed against me. This all happened in 2007. I want to pay it so it will come off my credit but I'm not sure of how to go about it. Should I offer to pay a reduced amount or pay the entire amount? Also should I call the lawyer or send a letter to inquire about paying?
    0 Votes

    • BA
      May, 2012
      Bill
      Four Bills.com reading assignments that will answer your questions:

      Please ask any follow-up questions you may have on the most appropriate page.

      0 Votes

  • TW
    Mar, 2012
    Terry
    I am applying for credit on a new car and there is a civil judgement for 16k on my credit score. If I remember correctly, this started in 2005 where I had to go to the hospital and had no insurance at the time. I didn't have money to pay so I ignored it. I received letters in the past but the name spelled on the letter does not match mine so I threw those away. Since this is in California, will this come off my credit report since its about 7 years, or will this stay on? Does statue of limitation apply to this?
    0 Votes

    • BA
      Mar, 2012
      Bill
      Under the FCRA, judgments are reported for 7 years or as long as they are valid, whichever is longer. A California judgment is valid for 10 years, and can be renewed. Therefore, a California judgment will appear on a person's credit report for 10 years.

      The statute of limitations, or lifetime of a California judgment is 10 years from the date the judgment was entered. As mentioned, a California judgment can be renewed. The judgment gives the judgment-creditor the right, under California law, to garnish your wages, place a lien on your property, or levy your bank accounts. Consult with a California lawyer to learn more details about your rights under California law.
      0 Votes

  • DP
    Feb, 2012
    Danielle
    Hi, I am trying right now to get per-approved for a mortgage loan with my husband under FHA. We have credit scores 670-720. The only thing I see as an issue is a judgement on 2/3 of my husband's credit reports. We actually settled and paid the company back before the judgement was filed. The account the judgement is for has a last payment date in early 2004, under the Fair Crediting act should this judgement be removed from his report because it is well past the 7 year mark for negative marks on the report?
    0 Votes

    • BA
      Feb, 2012
      Bill
      A judgment can usually stay on a credit report for as long as state law allows a judgment to run or for seven years, whichever is longer.

      If the judgment was paid, then that should be noted in the credit report. The usual language says "judgment satisfied, indicating that you had a judgment but no longer owe the money. If the information in the credit report is not correct then you can dispute the item. I don't believe that that one item will disqualify you from the FHA loan, especially when you can prove to the underwriter that the debt has been paid.
      0 Votes

    • DP
      May, 2012
      Danielle
      Thank you for your response to my initial question. We disputed the 2 bureaus that had the judgement still listed as unsatisfied. We supplied the settlement letter, the cashed checks w/d electronically, and the bank statements, stamped and showing the withdrawals they both marked it as satisfied at that point. We were approved for a home loan shortly after this. The only problem is literally 2 days later one of the bureaus changed the judgement on their report back to unsatisfied (I received no notification of this as well and this while I am set up for the credit monitoring and just saw it yesterday when I looked at our account with that bureau). We are getting ready to close on the 23rd of this month on a FHA loan, and I am concerned they will pull the one report that is reporting the status of this wrong. Will they most likely do this and even if they do will a lender typically take the proof I have listed as sufficient that we did pay this debt? Thanks very much :)
      0 Votes

    • BA
      May, 2012
      Bill
      Some lenders will pull an applicant's credit report moments before closing to see if the applicant's credit profile changed. Others do not, and it is up to the lender's underwriting department if it wishes to set and follow such conservative policy. In other words, I don't know what your lender will do.

      Gather the proof you provided the bureaus, and draft a one-page, to whom it may concern letter explaining the evidence. Should your lender stumble across the erroneous information published by the credit reporting agency, you can spring to your defense with your cover letter and proof to knock down the false information.
      0 Votes

  • LW
    Feb, 2012
    Larry
    I heard through my old roomate a law firm plans to sue me for $4400, a past credit card. I've settled all my previous accounts except for this because the law firm had a bunch of arrogant punks calling me and harrassing me. I actually won a settlment out of court for a lump sum they just paid me for harrassment. My question is could the judge rule against me without them bringing proper paperwork? None of their documents have been sent to my current address. Also, I have moved counties so if the judge rules against me can they really find my info in a different county? I think they are lying about how much I owe on this card. What should I do? How would they find me, and I even switched banks...
    0 Votes

    • BA
      Feb, 2012
      Bill
      I cannot speculate on how a judge will make his or her ruling. If you do not represent your case in court, then there will be no one to dispute their paperwork. The creditor can certainly attempt to collect on the debt. They can attempt to find information about you through investigation tools available and they can continue to pursue a judgment. If you owe them money, then you may wish to reach a settlement agreement before a judgment is made against you.
      0 Votes

  • JR
    Feb, 2012
    Jason
    Hello I was recently reviewing my credit report when I noticed that a Public Judgement placed against me on a piece of property that I sub-leased from another renter between August 2009 and August 2010. In August 2011, a year later, the landlord defaulted on both his mortgage and condo association fees. The law states in Illinois there can be a judgment against those "in possession" of theunit, including renters for the condo association fees. For some reason, the attorney thought I still lived here. I never received a summons for the lawyer representing the condo nor from the County Clerk. Even though I was moved out more than a year after this happened. I was still named in the class action. I have no idea how this happened. Should I call the law firm representing the condo association or should I wait for Equifax to finish the investigation which will take till early March!. I feel completely helpless and I have no idea what to do. I really want to know how they were able to do this without even being able to contact me first. I still live in Chicago only a few blocks away. Thanks :: J
    0 Votes

    • BA
      Feb, 2012
      Bill
      This is an odd rule, in my opinion, and one I had never heard of. It strikes me as unfair. Consult with an Illinois lawyer who has civil litigation experience to learn what defenses you have available.
      0 Votes