As consumers try to raise their credit score, they may wonder whether or not public records can actually damage their credit worthiness in addition to debts, overdue payments and other negative items. When consumers are the plaintiff or defendant in a lawsuit, they may be concerned whether legal action against them or on their behalf will lower their credit score. While the bringing of a lawsuit itself will most likely not negatively impact your credit score, the court's judgment can greatly affect your credit standing.
Here are questions you may want to ask yourself about lawsuits and how they affect your credit score:
Will My Credit Score Take a Hit After a Lawsuit?
According to FICO, there are certain scenarios when your public record, defined as a legal document issued by various levels of government, will influence your credit score. Lawsuits and other types of public records such as bankruptcies and foreclosures will be a factor in your credit score because these records are considered to be financial information, which is typically reported to credit bureaus. Lawsuits have the potential to affect your score if there is a court judgment made against you. Losing a court case could result in you owing money as part of a civil judgment as well as paying other legal costs associated with the lawsuit, which could add to your other monthly bills.
How Long Will a Lawsuit Hurt My Credit Score?
Certain negative public records will last between seven to 10 years on a credit report with the exception of tax liens, which tend to stay on indefinitely. In the case of a lawsuit, a judgment will typically stay on a credit report for seven years. Even after payments related to the lawsuit are paid off completely, there is still the possibility the lawsuit could continue to affect your score. Avoiding a negative judgment altogether by getting the other party to dismiss the lawsuit may prevent you from taking a hit in your credit report from a lawsuit. Although it is not impossible, consumers also have the opportunity to remove a judgment from their credit report by disputing it later on.
What Can I Do To Stop My Credit Score from Dropping Because of a Lawsuit?
While you are in the process of a lawsuit, you should remember to still pay off any debts or bills you may have. Engaging in litigation – whether you are the plaintiff or defendant – is a stressful time in your life. Adding to this stress is the weight of pending bills, overdue charges and other negative items on your credit report that may happen as a result of you putting all your time into a lawsuit. To prevent lawsuit costs from becoming unmanageable, you should pay a judgment in full as quickly as possible to avoid it becoming a negative line in your credit report should it go into collections so as to eliminate the stress of having to pay another expense apart from your regular bills.