Is there a judgement on your credit report?

What is that judgement on your credit report and how are you going to get it off?

The questions about judgements on credit reports continue. There seems to be confusion about the difference between a judgement and a lien and also about how to clear it up. Iím going to try to cover several questions at once here, which might help a little.

A judgement against you is the result of you losing a case in court. Usually, a creditor goes to court to get a judgement against you for the amount of the debt you owe. This is because a judgement can be recorded and enforced. The creditorís other options would be to write off the debt or send it to collection and lose most of it to fees.

That judgement, if recorded, becomes a matter of public record. If you have property or buy property, a title search will turn up items of public record.

If the creditor who won the judgement decides to enforce payment, the next step is to file for Discovery of your assets. The judge can order that your assets be sold to pay the judgement.

Judgements create a cloud in a real estate transaction because if you buy this house and then youíre ordered to liquidate it to pay this judgement, the mortgage lender may not be in a position to realize full payment of the mortgage. Generally a situation like this adds a heavy layer of risk to the entire deal

If you have a judgement against you, the mortgage underwriter has to review the whole situation to see if this judgement represents the way you normally handle your credit obligations. Are you bad news? Or was this a fluke that you have under control now?

If the creditor who has the judgement is receiving payments from you and they are happy and convinced that those payments will continue, they might agree to subordinate their lien position so that the mortgage lender can be in first position in the chain of title. If there is enough value in the house for everybody, you might be able to leave the judgement as is and continue making payments rather than paying it off.

Judgements can happen for all kinds of reasons. I have seen them for back child support, dental bills, credit card default, car repossession, and everything else you can think of. The underwriter looking at your file has probably seen it all, too. Explain what happened and how you are handling it. Tell the truth and provide the proof.

Having a judgement against you will lower your FICO score considerably. If you can avoid it by paying your bills on time, do it. If something happens that you couldnít control, then get it under control and fix it or make arrangements as soon as possible.

Copyright: October 4, 2005, all rights reserved