We all know that “judgments” are death to a credit report. But which ones?
If I skip out on a credit card bills, that obviously bad.
But what if I have a legitimate beef with a contractor, let’s say, and we fight it out in court, but I lose in the end. Still a hit?
Surely a civil judgment for divorce doesn’t hit my credit.
And what in between? Where is the line drawn?
Here’s a previous thread where this question came up, but there wasn’t a good answer.
Lawyers, is there something objectively obvious between a judgment for failing to pay a bill where the defendant had no legitimate excuse (e.g. you just didn’t pay your credit card bill, they sued, and you offered no defense) and a judgment where there was a bona fide dispute between the plaintiff and the defendant and the defendant didn’t pay because they honestly thought that they were not required to (e.g. your landlord sent you a bill for an extra $1000 in ‘cleanup fees’ due to what it claimed was an unsatisfactory inspection, you refused, claiming that such assessments were illegal under the Apartment Reform Act of 2005, they sued, you lost because the judge said that the Apartment Reform Act only applies to apartment constructed after 2006 or within an Urban Renewal Zone, and you promptly paid the $1000 plus court costs judgment)?
Could it be the case that judgments don’t appear on your credit rating until you have been given X days to pay and you have failed to do so? Could it be the case that judgments only hit your credit report if you fail to put forth a defense? That could seem to be a hazard as people could then prevent no-pay judgements from appearing on their credit report by raising frivolous “defenses” and calling irrelevant witnesses that they know won’t help their case in order to be seen as having a legitimate dispute and thus not a no-pay Joe.
Robert, you got to the heart of my question. There is a definite difference between: 1) Neener, neener, I’m not paying, and 2) I don’t think I should have to pay you, we go to court, and a judge decides I’m wrong.
It seems that if #2 shows up on a credit report it would force people into paying when they might otherwise want to fight the underlying claim. But as you say, if #2 wasn’t on a credit report, those scofflaws in #1 could simply offer a meaningless defense and get out of a credit hit.
The FICO people say a divorce doesn’t but most other things do if you get a judgment against you.
http://www.myfico.com/crediteducation/questions/public-records.aspx
Experian says the same thing.
Transunion the same thing:
This makes a lot of sense. After all, anyone can write up a “bill” and send it to someone. Even big businesses or organizations occasionally make mistakes and try to bill for money that they are not legally entitled to collect from the billee, such as money actually owed by an identity thief that impersonated the billee/defendant, accounting mistakes such as failure to process a payment (this happened to me!), misunderstanding of the law, disagreements on the correct interpretation of a contract clause (e.g. the contract says that an early termination fee applies if you cancel service for a “culpable” reason, but you and they can’t agree if cancelling service due to being accepted into a residential college program a thousand miles away is “culpable”, so you both go to court). One of the reasons that we have civil courts is to untangle these types of matters and determine who owed what to begin with.
Interesting.
The MyFico seems to be referring to the essence of the OP’s question when it says, “My mechanic is taking me to small claims court for additional work he did on my car that I did not approve. I don’t think I should have to pay him for work I feel was not necessary, especially since he didn’t get my approval first. Will this affect my credit?..” This is clearly a case where the defendant has what they believe to be a legitimate legal reason to not pay, as opposed to not wanting to pay or not being able to afford to pay. The article then sort of weasels around and says that “some” judgments affect your credit report. Later it says (emphasis mine), “… Some public records, such as divorces, are not considered by your FICO score, but adverse public records, which include bankruptcies, judgments and tax liens, are considered by the FICO score. Your score can be affected by the mere presence of an adverse public record, whether paid or not…” This seems to indicate that a #2 judgment hits your credit score as hard as a neener neener nopay one.
Has anyone here ever had a #2 type judgment appear on their credit report even though they promptly paid the judgment after the court ruled against you?
Has anyone seen any cases where a potential creditor will agree to ignore a judgment on your credit report because it was a promptly paid #2, assuming that you can prove to the bank or whatever that you had an honest, though mistaken, beef with a former creditor?
[QUOTE=TransUnion]
Judgments
Generally, most court judgments, including small claims, civil and child support, stay on your credit reports for up to 7 years from the date they were filed.
[/QUOTE]
Don’t (nearly) all divorces involving minor children have a decree of child support? Or do they mean judgments against back child support that is unpaid?
But I think we need a new system where a judge can decree as part of a judgment whether a defense was in good faith and flag that for inclusion/non-inclusion for credit purposes (so long as the judgment is paid within a period of time). Because as is it now, if some guy says I owe him $800, I might forego my constitutional right to fight that in court because it isn’t just $800 on the line. If I want to buy a house in the next 7 years, I am risking being unable to do that, or paying thousands more in interest. I’d better not take the risk and just pay.
It seems that the current system gives Plaintiffs a large ax to hang over the head of Defendants.
The point is, if it went to court, that means it was not promptly paid. Potential creditors use credit reports to reduce the likelihood of ending up in court to collect a debt. If you have a judgement against you, that means you are a risk of litigation in the future.
In the eyes of creditors, there are no lawsuits that are just disageements between equals. If you lose, that means you should have paid up when the plaintiff first asked for the money, not after they had to drag you into court.
You are making too many assumptions here. It is possible to have disputes between individuals and not unpaid bills to corporations that are legitimate disputes. These judgments should in no way affect a person’s credit rating, but they do. The credit bureaus do not discriminate by plaintiff.