NEW YORK -- It happens to the best of us: you let an old debt get too far. No longer merely a collection, the debt has become a judgment. This means that a court has found against you and your debt is a matter of public record. It's stuck on there for the next 10 years, right? Wrong. In fact, there are ways to get judgments off of your credit report that are relatively painless.
Pay For Removal?
One of the main things people will do to get a judgment taken off of their credit report is pay it. Sometimes this is done under a "pay for removal" understanding. However, Mike Sullivan of Take Charge America, points out that pay for removal isn't an option once you have a judgment. "If [your outstanding payment] is 90 days late you can negotiate," he says, "A judgment is a public record."
This is because a judgment is entered by the courts, not your creditor. So your quest to get a judgment taken off of your credit report will begin with contacting the court who made the judgment.
But can you even get a judgment taken off of your credit report once it has been entered into the public record?
So Can You Remove It?
The short answer is yes. In fact, Randy Padawer, a consumer advocate at Lexington Law, is a little more bullish on removing judgments.
"I actually think removing judgments are some of the easiest things to do," he says, going so far as to say "recent 30-day-lates are much harder to remove than judgments."
Padawer says this is because the courthouses and specialty data brokers who act as their intermediaries are, in his words, "notoriously terrible at meeting their legally required options when it comes to substantiating data reporting." What this means, in effect, is that they don't keep good enough records for the judgment to survive scrutiny. If you challenge a judgment, Padawer believes that more often than not, courts and third-party data brokers will fold without a fight.
"You start out by asking them to substantiate the judgment," he says. This is basically just writing a letter and asking the court to prove that the judgment is valid and provide you with relevant information. "You have every right to ask questions about your judgment," he says. In some cases, this might be enough to get the judgment removed.
What Kind of Information Can Invalidate a Judgment?
Provided that you collect the information, but the judgment, lien or other public record remains on your credit report, where do you go from there? Any kind of inaccuracy can mean that the judgment will be vacated. You might still have to settle the debt, but the judgment can be removed.
"If you have something that says 'James L. Smith' and your name is 'James P. Smith,' it can be as easy as bringing in your birth certificate," says Sullivan. He further points out that the burden of proof is on the creditor to demonstrate that the debt is legitimate -- not on you to prove that the debt isn't yours.
Padawer notes that basically any kind of inconsistency in the judgment can lead to its being removed from your credit report or vacated. "If the amounts are incorrect, if the dates are incorrect, if anything about it is incorrect, it needs to be modified or removed," he says. What's more, if you have proof that what you paid the company is more than what's being requested under the judgment, this is also cause for removal.
For those who have received tax liens, the process is much easier: you can get any tax lien that you've paid off removed from your credit report. However, you have to actually request having it removed.
When it comes down to it, though, Sullivan urges people to contest judgments at the time, rather than blowing off a notice they might receive in the mail. "After the fact, your burden of proof is a little higher," he says. "It's amazing how many people do not contest judgments when they get a letter. It's much, much easier to do it in court."
10 Financial Land Mines That Can Decimate Your Net Worth
How to Get a Judgment Off Your Credit Report
Managed to get that raise or promotion? Fantastic -- now don't go out there and spend it all immediately. In classic "keeping up with the Joneses" fashion, too many of us see an increase in salary or a sudden windfall (like an inheritance) as an excuse to take our lifestyle up a notch. We buy bigger houses than we need, get the latest gadgets even though ours work just fine,and spring for fancy steak dinners just because we can.
Instead, whenever your financial situation gets a boost, consider the best ways to put that money to work for you. The truly wealthy are those whose money continues to grow and earn them more, even when they're not actively doing anything with it.
The average American household that carries credit card debt holds a balance of around $15,000. If you're among those who have a credit card balance, you've probably seen the little chart on your monthly statement telling you how much you'll pay in interest over the next several years if you make only the minimum payment. (If you haven't, look at it.) The same chart will also compare that to a "suggested" payment that's slightly higher.
Our recommendation? Throw everything you can at paying your balances off as fast as possible. And make sure not to take on any additional debt in the future; if you can't pay for a consumer good out of pocket, don't finance it.
We don't demonize student loan debt the way we do credit card debt because we see an education as an investment -- and higher education often is the difference between one income bracket and another. Similarly, many people justify taking out a car loan by stating that they need a car to get to work.
That said, debt is still debt, and the longer you take to pay it off, the more interest you'll pay. Once you've freed yourself of credit card debt, paying down your car and student loan balances should be next on your list.
Whether it's to handle an unexpected car repair, a sudden illness or a major plumbing problem, you should always have some money set aside to cover unforeseen expenses. Set up a regular monthly transfer from your checking to your savings account to earmark this money before you're tempted to touch it. If necessary, cut back in another budget category (like eating out or entertainment) to free up the funds to save more.
Putting aside a little each month could prevent you from getting socked with a hefty bill you can't afford and then need to finance.
No matter your age, you should be adding to your retirement funds -- such as your 401(k) or individual retirement account -- each month. Just setting aside money sporadically won't cut it; you need to identify how much you'll need to live on once you stop working and monitor whether you're on track to reach that amount.
Here's a quick-and-dirty rule of thumb: multiply your annual spending by 25. This is the amount you'll need in your retirement portfolio, if you assume that you'll withdraw 4 percent per year to live on during your retirement. In other words, you'd need $1 million in your portfolio to live on $40,000 annually. Creating a plan will help you make sure you're able to retire the way you envision.
A home is a big investment, and sometimes that investment doesn't wind up netting you the return you thought it would.
The biggest culprit is having too large a balance on your mortgage, which detracts from your own personal stake in the current market value for your home. The sooner you pay this amount down, the better your home equity will be.
You also want to be careful when purchasing a new home. Buying in a neighborhood that's on the downward spiral or buying the most expensive home on the block, likely won't net you a good return when it's time to sell. Also take care to stay away from custom renovations (like turning the garage into a recreation room), which could negatively affect your resale value.
Paying high investment fees eats away at your gains. And since your gains compound over time, this creates a domino effect that can really chip away at your wealth. Take a close look at your investment companies' fees and shop around to make sure they're not taking more of your money than they need to be.
If you don't have a long-term investment vision and are simply playing the market, you could seriously undermine your wealth-building potential. Stop paying attention to market fluctuations, media pundits and the stories of your friends and family. Instead, create your own long-term investment strategy that will maximize your overall returns. Resist the urge it play it ultra-conservative (or fall for get-rich-quick schemes) and educate yourself on the best way to make your dollars work for you.
If you're having trouble making sense of your options or want a second opinion, seek the help of a trusted financial adviser.
Based on your experience and seniority level, education and industry, you should have a fairly good idea how much you ought to be making at your job. If you don't, check out a site like PayScale to get a ballpark figure.
If you're not making what you're worth, you're doing more than leaving money on the table; you're also losing all the compound growth and investment returns that money could be generating for you. Invest in yourself with professional development and continuing education, make the case for that raise or promotion, or seek out a company who will value you higher.
If you don't have proper insurance coverage, you're taking a very big risk that could come back to bite you. Too many people think the worst can't happen to them, but the hard truth is you can't predict the future, and scrimping on sufficient insurance is never a good idea.
Of all the things we're hesitate to part with our money for, adequate insurance coverage should not be one of them. No matter your age, everyone should be properly covered with:
Homeowner's or renter's insurance.
Flood insurance (if you live in a flood-prone area).
Umbrella liability insurance (especially if you own a small business).
If a spouse or children relies on you for support, make sure you have a decent term life insurance policy, as well.