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What is a judgment?
Debt judgments relate to court proceedings held by a magistrate in which a person owes a debt to another party.
For example, if you have a mortgage and your repayments are not made on time and in full, then you are in default under the loan contract.
When this happens, the lender has the right to take you to court to recover the money you owe.
What do lenders know about my court judgment?
Credit providers will see the court judgment on your credit file.
- It gives them an indication that you have been in financial trouble that you have been unable to resolve.
- However, they don’t know the full details of precisely what happened and whether you were at fault or not.
From a bank’s point of view, a court judgment:
- Shows that the person was unable to come to a suitable agreement with the creditor without resorting to legal action.
- Shows that there has been legal action which raises the possibility that there may be other legal action going on.
- Is a very high risk and will affect your credit score.
They only know that the court ordered you to pay the other party and that you did not make this payment on time or at all.
They will ask for an explanation behind the judgment and will consider your reason when assessing your home loan application.
How long will judgments stay on my credit report?
Judgments are considered public records and are put on your credit file when you receive a magistrate’s order to pay a debt.
They remain on your credit file for five years from the date of judgment.
Paid or unpaid judgments?
Judgments are worse than defaults because they are court orders.
These are directives to pay a debt of which you have breached the terms, and they stay on your credit file for five years whether or not the default has been paid.
It is still better if you pay out the debt so that the judgment can appear as “paid” on your credit file rather than remaining as “unpaid”.
Please discuss this with one of our mortgage brokers before you pay an outstanding judgment. You can call us at 1300 889 743 or fill in our free assessment form.
What judgments cannot be listed on your credit report?
Up until now, if you as a business owner had a small dispute with one of your suppliers, the supplier could file a claim, and it didn’t matter if it had no chance of success, it was enough to impact your credit file to the point that you couldn’t qualify for loans.
The OIAC (Office of the Australian Information Commissioner) approved a variation to the Privacy (Credit Reporting) Code 2014 (the CR Code) under which, “writs and summons will no longer be considered publicly available information, and can no longer be listed on credit report.”
The new legislation which will come into effect from February 14 2020, will mean people with a civil court action that isn’t a result of judgment and isn’t credit-related will not appear on your credit report.
What’s a non-credit-related judgment?
A person to person judgment is not credit-related.
As an example, if someone fails to pay their City Council rates, the judgment cannot be listed on their credit file, since the judgment is not credit-related and the City Council does not hold a credit license.
Another example is, if you were in dispute with your mechanic, they could still make a claim for the amount owed, but the information will not show up on your credit file since it’s not credit-related and they do not hold a credit license.
Judgments that are not credit-related should not appear on your credit file and are removable.
How can I remove non credit-related judgments?
From February 14, since the legislation has changed, people don’t need to do anything.
However, if a non-credit related judgment still appears on your credit file after February 14, you can notify the credit reporting bureau (CRB) directly and ask them to remove it as per legislation. You’ll have to contact each CRBs individually.
How can I remove credit-related judgments?
For credit-related judgments, it is only removable if it’s paid and if the plaintiff agrees to it.
You may be able to do it yourself if you have the know-how and the time, but for most, it is recommended that you seek a law firm (lawyer) specialising in removing judgments.
To remove a judgment yourself:
- Contact the plaintiff and ask them to sign a notice of consent. They’ll usually only agree to this once they’ve been paid in full.
- You’ll then have to file them with the local court. It usually takes anywhere between a couple of days to 28 days. Depending on the state, there may be a fee between $0 and a couple of hundred dollars.
- The case will be reheard, it will then be stamped, sealed, and if satisfactory, it may be dismissed.
- The defendant will get a notification saying it’s been dismissed.
- Then, you’ll have to file that with all three CRB, i.e. Equifax, Experian and Illion.
- The judgment is then removed from your credit report typically, within 10-15 days.
*This information was sourced from MyCRA Lawyers.
Case Study: Refinance with judgment
Happy with the news of a lower interest rate, Rebecca and Elton were all set to refinance their home loan.
They had all their documents ready and approached their bank. Unfortunately, their application was declined as Rebecca had a $1,000 judgment on her credit file.
Undeterred, the couple sought our help. One of our mortgage brokers advised Rebecca to get her judgment removed before applying with another lender.
Rebecca immediately worked on paying the $1,000 judgment and requested a Notice of Discontinuance. This formal notice is served to the defendant to end the active lawsuit.
Now that the judgment was removed for Rebecca’s credit file, the couple was able to refinance to a better home loan.
Learn how we helped Rebecca and Elton refinance a home loan with judgment.
Are you facing a similar situation like Rebecca and Elton? Our mortgage brokers specialise in helping people with bad credit get a home loan. Call us at 1300 889 743 or fill in our free assessment form.
Which lenders can approve you for a home loan with a judgment?
There are a number of lenders we can recommend, depending on your individual circumstances.
As Home Loan Experts specialise in bad credit home loans, we are in a great position to offer help. Please call us at 1300 889 743 or fill in our free assessment form today.