When you fall behind on your debts, and especially when you get sued over one of your debts, credit is one of your biggest concerns.
Does the lawsuit show up on your credit report? How does the lawsuit, and potentially a judgment, affect your credit? And if you defeat the lawsuit, does the underlying debt come off of your credit report? Our Katy debt collection attorney has the answers that you need.
Here are the things you need to know about how your lawsuit will affect your credit.
The lawsuit will not appear on your credit report unless it results in a judgment
Under the Fair Credit Reporting Act (FCRA), the lawsuit cannot appear on your credit report until and unless it results in a judgment.
If the lawsuit results in a judgment, the judgment can remain on your credit report for at least 7 years and possibly much longer
A judgment can remain on your credit report for 7 years, or until the judgment expires, whichever is later.
In Texas, judgments are valid for 10 years, and they can be renewed for another 10 years after that, and then another 10 years that and so on.
As long as the judgment remains active (as long as the creditor renews it), it can remain on your credit report. Paying or settling the judgment will not get it off your credit report any sooner, but it will prevent it from being renewed, and, in that way, limit the amount of time that it can appear on your credit report.
Defeating the lawsuit will not get the underlying debt off your credit report
The underlying debt can remain on your credit report for 7 years from the date of last activity on the account, just as with any other derogatory entry on your credit report. Defeating the lawsuit will not get the underlying debt off your credit report any sooner.
Defeating the lawsuit will, however, prevent you from getting a judgment on your credit report, which is much worse than a charge-off and is a new credit event than can remain on your credit report for at least 7 more years, and possibly longer.
Your goal, credit-wise, is to avoid a judgment
Your main goal, from a credit perspective, is to avoid getting a judgment against you.
When you get sued, you might be 2 or 3 years into the 7 years that the debt can remain on your credit report. Which means that you have 4 or 5 years until the underlying debt drops off. But if the lawsuit results in a judgment against you, the judgment will go on your credit report as a new entry and will remain there for at least 7 more years and possibly much longer.
The easiest way to avoid getting a judgment against you is to defeat the lawsuit. And defeating the lawsuit has the additional benefit of making it so that you don’t have to pay the debt.
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