A creditor may sue you for an outstanding debt and obtain a default judgment against you. This will stay on your Equifax, Experian and TransUnion credit reports for seven years, making it harder to open new credit accounts and possibly costing you more in interest. You can clean up your credit reports so the default judgment will carry less weight. Minimize its effects by removing from your credit reports as many negative items as possible and pay your bills promptly.
Step 1
Order copies of your credit reports to determine if you have negative items on them. You won't be able to do anything about the default judgment if it is legitimate, but you sometimes can get other items removed from your reports if they are in error. You are allowed to obtain one free copy a year of your credit report from each of the three major credit bureaus once a year through annualcreditreport.com.
Step 2
Send dispute letters to the major credit bureaus that list every mistake that you found on your credit report. The current address will be on each credit bureau website. Your letters should include details of each mistake and ask for an investigation. State that you know you are entitled to this under the Fair Credit Reporting Act (FCRA) to show you know your legal rights. Send the letters by certified mail and ask for a signed delivery receipt. The credit bureaus have 30 days from the date they receive your letter to do the investigation. They must pull any unverified items at the end of that time span according to the FCRA.
Step 3
Pay down any accounts that have high balances. This will make you more attractive to creditors and offset some of the perception that you're a poor repayment risk due to the default judgment. Low balances make for a cleaner credit report.
Tips and Warnings
- Make payments on all your current accounts on time. FICO, the major credit score company, explains that over a third of your score is based on your payment history. Maintaining a good payment record after the judgment will go a long way toward cleaning up your credit. Carreon and Associates, a debt settlement company, advises keeping a default judgment off your credit report whenever possible. You can often settle out of court even if a creditor has initiated a lawsuit against you. Contact the creditor and try to negotiate a settlement that will stop the court proceedings.
- Credit.com warns that a judgment can cause you more problems than just a blemish on your credit reports. In some states the creditor can garnish your wages, attach your bank accounts or place a lien against your personal property.
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