How to Remove a Money Judgment From Your Credit Report
A money judgment occurs when a creditor, most often a debt collection agency, files suit against you in court and you either fail to contest the lawsuit or the collector successfully proves its case to the judge.
Once the judge issues a money judgment to the plaintiff, it becomes a judgment creditor and receives additional collection rights under the law. The judgment also appears on your credit report.
How a Money Judgment Affects Your Credit Score
A civil judgment, such as that levied in a debt collection case, is entered into the county public record within a week. After this time, the judgment creditor may pick up its certified copy of the ruling and use that document to enforce more aggressive debt recovery methods.
The credit bureaus regularly review new public records as soon as they are uploaded into the national Public Access to Court Electronic Records (PACER) database. For courts that do not submit records to PACER, credit bureau representatives review new public records manually. Once picked up by the reporting agencies, a civil judgment will appear on your credit report as a derogatory public record.
The amount of damage you’ll suffer depends on your previous credit score. As a rule, higher credit scores suffer a greater loss of points after any derogatory entry, but on average, you can expect to see a drop of at least 100 points following a money judgment appearing within your credit history.
Vacate a Money Judgment by Contesting the Court Ruling
You have the right to an appeal when a judgment is levied against you. Successfully appealing the court’s ruling is easier if the money judgment was awarded by default. Default judgments are automatic in cases where the debtor doesn’t respond to the initial court summons or show up at the hearing.
If you did appear at the hearing and the debt collector still won its case, you know the company has managed to keep relatively thorough records of you and the debt that you owe – enough so that it was able to “prove” the debt’s legitimacy to the judge. While fighting a debt collection lawsuit is something most consumers can do on their own, contesting a civil judgment that wasn’t awarded by default is more tricky and hiring an attorney is a wise option.
Some states places strict limitations on the amount of time you have to vacate a money judgment after its been awarded. If you fail to act within the allotted time frame, often 30 days, you may lose the right to fight the ruling and remove the derogatory public record from your credit report.
Wait Out the Judgment Reporting Period
The Fair Credit Reporting Act is responsible for setting federal reporting periods for different types of financial entries you may find on your credit report. While most reporting periods are federal, judgment reporting depends upon the statute of limitations for judgment enforcement in your state of residence.
The FCRA states that the default reporting period for civil judgments is seven years. The exception to this rule is if a state’s legal enforcement period exceeds seven years, the public record will remain for the full enforcement period. If the state’s enforcement period is less than seven years, the reporting period is set by the seven-year federal limit for most negative credit information.
As a result of this, you shouldn’t see a money judgment on your credit report for a longer period of time than the creditor has to legally enforce it. Although some states allow judgment creditors to renew their legal claims prior to the expiration of the state enforcement period, this does not renew the judgment’s reporting period within your credit history.
If you find an old money judgment on your credit report, notify the credit bureaus of the obsolete entry to have it removed. Notifying the credit bureaus of obsolete entries is usually much easier than formally disputing credit information since, typically, no investigation is required to remove obsolete accounts and public records from your credit report.
Dispute the Money Judgment With the Credit Bureaus
When you dispute any debt on your credit report with the credit bureaus, section 611 of the FCRA gives each credit bureau 30 days to investigate the entry and either delete it or verify its accuracy.
As soon as you dispute a money judgment, the credit bureaus will contact the court that originally heard the case and ask if the entry was correct. Unfortunately, no actual proof is needed during this process. If you’re lucky, the credit bureaus will reach an honest court clerk who promises to look up the information and return the call. If the court clerk forgets to do so or cannot locate a record of your money judgment within her computer system, she cannot verify its accuracy with the credit bureaus and they will remove the money judgment from your credit report.
Removing a Money Judgment Doesn’t Invalidate the Court Ruling
While having the original court ruling overturned gives you instant grounds under which to demand that the derogatory public record be removed from your credit history, removing the credit bureaus’ record of a civil judgment via the dispute method doesn’t automatically invalidate the judgment itself. Thus, the creditor can continue to use garnishment, levies and liens as legal collection tools throughout the remainder of your state’s enforcement period even if you remove the money judgment from your credit report.