A judgment is a legal order issued by a court that requires an individual or entity to pay a debt owed to a creditor. When a creditor is unable to collect payment on a debt, they may take legal action to obtain a judgment against the debtor. Once a judgment has been issued, it becomes a matter of public record and can negatively impact the debtor’s credit score. In this article, we will discuss the companies that place judgments on credit reports and how they affect credit scores.
Types of Companies that Place Judgments on Credit Reports
There are several types of companies that can place judgments on credit reports. These include:
- Creditors – A creditor is a company or individual who extends credit to a debtor. If the debtor fails to pay back the debt, the creditor may take legal action to obtain a judgment against the debtor.
- Debt Collection Agencies – Debt collection agencies are companies that specialize in collecting debts on behalf of creditors. If the creditor is unable to collect payment on a debt, they may hire a debt collection agency to pursue legal action against the debtor.
- Government Agencies – Government agencies, such as the Internal Revenue Service (IRS) or the Department of Education, may obtain judgments against individuals who owe taxes or student loans.
How Judgments Affect Credit Scores
A judgment on a credit report can have a significant negative impact on a credit score. The presence of a judgment indicates that the debtor has failed to pay a debt and may be at risk of defaulting on future debts. This makes them a higher risk for lenders, who may be hesitant to extend credit to someone with a judgment on their credit report.
Judgments remain on credit reports for seven years from the date they were filed. Even if the debt is paid in full, the judgment will still appear on the credit report for seven years. This can make it difficult for individuals to obtain credit or loans during that time.
In addition to affecting credit scores, judgments can also lead to wage garnishment or bank account levies. A wage garnishment occurs when a portion of an individual’s wages is withheld to pay off a debt. A bank account levy is when funds in an individual’s bank account are seized to pay off a debt.
How to Remove a Judgment from a Credit Report
Removing a judgment from a credit report can be a difficult and time-consuming process. The best way to remove a judgment is to pay off the debt in full and then request that the creditor or debt collection agency remove the judgment from the credit report. It is important to obtain proof of payment and to follow up with the creditor or debt collection agency to ensure that the judgment is removed from the credit report.
In some cases, it may be possible to negotiate a settlement with the creditor or debt collection agency. This can involve paying off a portion of the debt in exchange for having the judgment removed from the credit report. However, it is important to obtain legal advice before entering into any settlement agreements.
Judgments can have a significant negative impact on credit scores and can make it difficult for individuals to obtain credit or loans. It is important to pay off debts in a timely manner and to work with creditors or debt collection agencies to have judgments removed from credit reports. If you have a judgment on your credit report, it is important to take steps to address it as soon as possible to minimize its impact on your credit score.