You may have seen the ads on television & non-profit agencies set up to help you escape debt by offering a credit counseling service. They promise to “consolidate” your debt into one lower payment at no cost to you.

The way they get paid is through “donations” from your creditors. They negotiate with all of your creditors to lower your interest rates and payments. You pay the counselor the sum of your creditors; payments. They send the payments to the creditors. In exchange, the creditors pay the counselor a donation. Sounds like a good deal, right?

Before committing to such a service, you must understand what their purpose is. In order to attain a non-profit status with the IRS, they must provide actual educational services to consumers to help with their debt management, budgeting, and so forth. Currently, the IRS is auditing many of these organizations. So far, they have found that these credit counselors do not provide such a service and only exist to receive fees from creditors. They have revoked the non-profit status from several companies. These companies are called & predatory credit counselors They take your monthly payment, and instead of shipping it off to your creditors, they pocket the money for themselves. These bad apples have put the consumer in a real dilemma.

The new United States bankruptcy laws will require debtors to enter a credit counseling program before actually entering bankruptcy. In theory, credit counseling can be a great service when executed correctly by all parties involved. That is, the counselors actually provide an educational service and the consumer actually learns and implements what they’re told. This can pave the way to a secure, debt-free future.

What can you do to avoid becoming a victim?

First, find out if there are any fees charged to you by the counseling agency. Even if they’re non-profit, they may still charge you for their services up-front, such as a setup fee. A reputable company won’t charge you exorbitant amounts for fees, as that would defeat the purpose of seeking their assistance in the first place.

Next, try to ascertain how your counselor is paid. If they make a salary, you’re in good shape. If they work for commissions or earn bonuses based on steering you towards more expensive debt consolidation programs, be wary. Good counselors will do what’s best for your pocket, not theirs. Just because the credit counselors work with creditors doesn’t mean creditors work with that particular company. When a consumer enters a credit counseling program, the counselor sends a proposal to the creditor. The creditor then has the option of approving or rejecting the proposal. If rejected, there is nothing further that can be done with that particular creditor. You’ll have to negotiate with them on your own. Call your creditors directly and make sure they will accept the proposal first. Get all promises and terms made by the counselor in writing. A verbal promise is not binding. As well, make sure the counseling agency sends monthly reports that outline every transaction; how much you paid them and where the money is going. Verify that your money is actually paying your creditors, and not your counselors.

How does entering credit counseling affect your credit? It depends on an individual lender as to how they view credit counseling. Your counselor will have you believe that it’s a positive because you’re taking proactive steps to get your debts in order. However, many lenders view credit counseling as the final step before bankruptcy. Entering counseling might signal to them that you have a debt management problem, and suspect that you may default on their loan. In fact, many lenders will deny your application outright if you’re currently in a debt management program, as if you were in an non-discharged bankruptcy. If you’re in a situation that might require credit counseling, or even bankruptcy, check your credit report first. Make sure that your report is completely accurate. If necessary, take steps to increase your credit score. You might benefit more from taking out an actual loan to consolidate your debts than to enter debt management and bankruptcy. You can only get a loan if your scores are high enough. Make an effort to raise your scores, get a consolidation loan, and make sure you never get into the same debt situation again!

You may have seen the ads on television & non-profit agencies set up to help you escape debt by offering a credit counseling service. They promise to “consolidate” your debt into one lower payment at no cost to you.

The way they get paid is through “donations” from your creditors. They negotiate with all of your creditors to lower your interest rates and payments. You pay the counselor the sum of your creditors payments. They send the payments to the creditors. In exchange, the creditors pay the counselor a donation. Sounds like a good deal, right? Before committing to such a service, you must understand what their purpose is.

In order to attain a non-profit status with the IRS, they must provide actual educational services to consumers to help with their debt management, budgeting, and so forth. Currently, the IRS is auditing many of these organizations. So far, they have found that these credit counselors do not provide such a service and only exist to receive fees from creditors. They have revoked the non-profit status from several companies. These companies are called “predatory credit counselors.” They take your monthly payment, and instead of shipping it off to your creditors, they pocket the money for themselves. These bad apples have put the consumer in a real dilemma.

The new United States bankruptcy laws will require debtors to enter a credit counseling program before actually entering bankruptcy. In theory, credit counseling can be a great service when executed correctly by all parties involved. That is, the counselors actually provide an educational service and the consumer actually learns and implements what they’re told. This can pave the way to a secure, debt-free future.

What can you do to avoid becoming a victim? First, find out if there are any fees charged to you by the counseling agency. Even if they’re non-profit, they may still charge you for their services up-front, such as a setup fee. A reputable company won’t charge you exorbitant amounts for fees, as that would defeat the purpose of seeking their assistance in the first place. Next, try to ascertain how your counselor is paid. If they make a salary, you’re in good shape. If they work for commissions or earn bonuses based on steering you towards more expensive debt consolidation programs, be wary. Good counselors will do what’s best for your pocket, not theirs.Just because the credit counselors work with creditors doesn’t mean creditors work with that particular company.

When a consumer enters a credit counseling program, the counselor sends a proposal to the creditor. The creditor then has the option of approving or rejecting the proposal. If rejected, there is nothing further that can be done with that particular creditor. You’ll have to negotiate with them on your own. Call your creditors directly and make sure they will accept the proposal first. Get all promises and terms made by the counselor in writing. A verbal promise is not binding. As well, make sure the counseling agency sends monthly reports that outline every transaction; how much you paid them and where the money is going. Verify that your money is actually paying your creditors, and not your counselors .How does entering credit counseling affect your credit? It depends on an individual lender as to how they view credit counseling. Your counselor will have you believe that it’s a positive because you’re taking proactive steps to get your debts in order. However, many lenders view credit counseling as the final step before bankruptcy.

Entering counseling might signal to them that you have a debt management problem, and suspect that you may default on their loan. In fact, many lenders will deny your application outright if you’re currently in a debt management program, as if you were in an non-discharged bankruptcy.

If you’re in a situation that might require credit counseling, or even bankruptcy, check your credit report first. Make sure that your report is completely accurate. If necessary, take steps to increase your credit score. You might benefit more from taking out an actual loan to consolidate your debts than to enter debt management and bankruptcy. You can only get a loan if your scores are high enough. Make an effort to raise your scores, get a consolidation loan, and make sure you never get into the same debt situation again!

When making a loan application, whether for a mortgage, auto loan, or personal loan, people worry about being approved. They worry about their credit history, and how it’s going to affect their approval. What most people usually don’t consider is their debt-to-income ratio. This can be a costly mistake, as it is one of the primary factors that lenders consider for approval.

What is a debt ratio? It is your total monthly debt divided by your total income. For example, if you pay $1,000 per month in bills and your income is $3,000 per month, your debt ratio is 1000/3000 or 33%. In other words, about one-third of your total income is taken up by monthly bills.

More goes into this equation, however. Lenders usually calculate your debt ratio using your gross monthly income. Some, though very few, will calculate debt ratio with net income. If they do use net income, they will usually take 75% of your gross income.

On the debt side of the equation, usually only debts that are reported on your credit report are counted against your debt ratio. That means, for example, your car insurance payments or your gym memberships aren’t taken into account. As well, many utility companies, such as electrical, gas, and water, will report your monthly payments on your credit report. However, utility bills and cell phone bills are usually not counted against debt ratio, even if they are on the credit report. In any case, debt ratio is not a good indication of your debt levels.

How does debt ratio affect your approvals? Lenders have different criteria for debt ratio. They might give a front end/back end ratio of 28/33. This ratio means that no more than 28% of your gross income can be allocated towards a mortgage payment. As well, your total debt load, including your credit cards, auto loans, and the new mortgage, cannot exceed 33%.

This ratio has several implications. First, the value of the house you can shop for cannot exceed a certain amount. Second, if you have a high debt load, it will limit your price range. Further, if you have an extremely high debt load, your debt ratio will not support any kind of price on a house. In other words, you’ll be denied no matter how good your credit if you have too much debt. This is the power of the debt ratio.

Debt ratio is not a good indicator of what you can or cannot afford. Debt ratio only applies to what the lender sees on paper. If you have a side business that generates a good amount of income, you might be able to afford a house in a higher price range. However, without the proper documentation, lenders cannot count your business income.
What can you do about debt ratio? You have a couple of options, but both point to manipulating your ratio in some way. First, you can pay down your debts. By paying down or eliminating some debts, you can improve your debt ratio and increase your buying price range. Obviously, the higher the payment you can knock out, the better for your debt ratio.

Here’s a trick you can use to better your chances. For most people, the highest payment on their credit report, outside of a house payment, is a car payment or other type of installment loan. Many lenders will not count an installment loan against your debt ratio IF there are less than 10 payments remaining. If there is any possible way for you to pay down your installment loan to fewer than 10 payments, your debt ratio will improve dramatically. For example, if you have a car loan that has 13 payments left, you don’t have to pay off the entire loan to enjoy the improved debt ratio. You simply need to pay 3 payments; worth to get the balance down.

Three caveats to this trick. First, this only works if the lender utilizes the 10 payment rule. Second, this only applies for installment loans; that is, loans that have a fixed term and fixed monthly payment (car loans, student loans, and some personal loans). You cannot use this rule against credit cards and other revolving lines of credit. Third, most lenders will not apply this rule to a car lease, so even if you have less than 10 lease payments remaining, it will count against you. The lease payment rule is not industry-wide however, so check with the mortgage company.

Debt consolidation companies are a dime a dozen, especially today. These companies have been hugely-successful because the number of people in debt has been growing steadily. The same people would try to manage their debts through debt consolidation methods. Some succeed easily enough while others fall into more debt trap.

Before deciding that debt consolidation is right for you, make sure that you are well-informed about it. For starters, you should know that there are many debt consolidation dangers including the following:

False Promises
There are certainly plenty of debt consolidation companies which will offer you too-good-to-be-true deals and chances are, they are. These companies are in the business of advertising that debt consolidation loans will provide you with so much convenience, you will have to wonder why you never considered them from the beginning. Although debt consolidation is really an effective way to get rid all your debts, you should remember the responsibilities that come with it. Even though the consolidation company will offer to do everything for you, you will have to understand that it will take a deep lever of commitment in order for this to work.

Hard Money Loans
Debt consolidation loans are really designed for people with credit problems. These loans are usually offered with a higher-than-standard interest rate. Although you can arrange the monthly payments to be smaller compared to what you have been paying in total, you might end up paying more than what you initially thought. To determine whether you will actually be saving money, you should try and compare the offers of several different companies. You can simply request a quotation from these debt consolidation companies and look at their best offers side by side.

Falling for Balance Transfer
Applying for balance transfer can show up in your credit report and cause you to lose precious credit points. If your application for a balance transfer is denied, you will still have to deal with all your debts. Unfortunately, your credit score may have been affected already by the balance transfer application and taking out a personal or home equity loan will mean higher interest rates and bigger monthly payments. If you do get approved, you will only enjoy the low interest rate for a pre-determined period and if this period is over, you will be paying a much higher interest rate.

When considering debt consolidation, it is very important that you are aware of the current status of your finances. Weigh available options carefully and make sure that if you do decide to apply for a debt consolidation loan, you can shoulder the responsibilities of paying it. Otherwise, you are just asking for more problems and this time your luck might run out.

Divorce is never a pretty subject, but it’s even uglier when it comes to your credit. What happens to your credit in a divorce situation?

In the credit world, there are two different types of accounts; namely, individual and joint.

Individual accounts are accounts in which one party is solely responsible, regardless of marital status. It also appears on the credit report of the responsible individual. If you live in a community property state, such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, both partners may be responsible for the debt, and the debt may appear on both partners credit reports. Individual accounts can be advantageous because your spouse’s debt need not be considered on loan applications, such as a mortgage. This is especially advantageous when one spouse makes enough money to qualify for a loan. The other spouse’s obligations normally will not count against your debt ratio.

However, the converse can be disadvantageous if you’re the spouse without the money. You will need your spouse’s income to be considered for an application. Along with the income will be your spouse’s own obligations, and if he or she has delinquent accounts, it will also be considered.

Joint accounts are accounts where more than one party is responsible for its repayment. Joint accounts don’t necessarily have to be between spouses. It can be between other family members, business associates, or any two parties who co-sign a credit application. Regardless, joint accounts can be advantageous in that both spouses incomes will jointly be considered for a loan application.

How are these accounts affected when you go through a divorce? When you have a joint debt, divorce does not wipe it out. The first thing to keep in mind is that joint debts stay joint debts. When you took out a joint account with your ex-spouse, both of you signed a legally binding contract with your creditors. The divorce decree does not nullify that contract, nor amends it. For a contract to be amended, it requires a signed agreement among all parties involved, including both spouses and the creditor. Unfortunately, creditors do not take part in divorce courts, so the original contract stays in effect. Normally, a divorce decree will spell out which spouse gets which debt. In a joint account situation, however, the debt will show up on both credit reports, just like you were married. Regardless of how your obligations are divided, the payment history remains on both reports. Therefore, if your ex-spouse is delinquent on his or her account, it will show as delinquent on your account, and will hurt your credit.

Divorce can take a tremendous financial toll on both parties. Sometimes, the financial hit is so devastating that one of the parties files for bankruptcy. When this happens, the spouse that didn’t file for bankruptcy is unaware of the filing. It can be months, even years, before they’ve caught wind of the situation, often too late for any sort of corrective action to take place. The non-filing spouse can be sued by the creditor legally for repayment of the debt. The non-filing spouse will also have a bankruptcy on his or her record. Unfairly so, but legally correct.

Individual accounts, on the other hand, will not usually factor in to a divorce, as the originating spouse is still responsible for the debt. If you are considering divorce, you should also consider the ramifications of your credit and accounts. Pay attention to what your financial situation might be after the divorce is finalized. You may wish to consider closing a joint account and re-opening credit in your own name. If your accounts are not joint accounts, but your spouse is listed as an authorized user, remove him or her from the account. The opposite also applies if you are an authorized user on your spouse’s account, have yourself removed as such. If you have a mortgage, you might wish to refinance into one person’s name.

Joint mortgages can be especially hurtful to your credit if you’re not the one paying it. If you’re headed for divorce, make sure your own credit report is in order. Keep an eye on your scores, as it may drop after the divorce is final. By doing so, you minimize any potential damage to your future finances and can bounce back quickly once your life gets back to normal.

It’s true that sub prime borrowers typically are people with challenged credit. However, credit is not the only criterion to be classified as subprime.
Although guidelines will vary by lender, you might be a subprime borrower if;

* You have a foreclosure on your credit report.
* You filed for bankruptcy, and it has not been two years since it’s been discharged.
* You have excessive late payments (60 days to 120 days and up).
* You’re enrolled in CCCS or an equivalent non-profit credit counseling service.
* Your income is primarily paid with cash or personal checks.
* You have very little equity in your home.
* You have a very high (above 40%) debt-to-income ratio.
* You are self-employed and have sporadic or difficult-to-verify income.
* Your home values are extremely low (under $25,000).
* Your credit score is below 620.

Notice that not every guideline is credit related. A subprime borrower can have absolutely perfect credit, but if he or she works as a housekeeper that is paid with cash, it’s quite possible that sub-prime guidelines would apply.

Even if your situation matches one of the above, there is always room for interpretation. For example, you might have discharged your Chapter 7 Bankruptcy two years ago. IF you have at least three accounts on your credit report that you’ve been paying perfectly for the two years since your discharge, you might qualify for a conventional mortgage. This is especially true if you’ve been paying your rent or mortgage on time, every time.

How can you avoid having to apply with a subprime mortgage company?
The very first step you MUST take is to obtain a copy of your credit report, along with your credit scores. Get a copy from each of the three major credit reporting bureaus: Equifax, Experian, and TransUnion. Each credit bureau maintains its own profile of your credit. They are completely independent of each other, and they do not share or swap information among themselves. You will therefore find that your three credit scores will be different.

Many mortgage companies, both subprime and conventional, will base their lending decision on the middle of your three credit scores. For example, your scores might be 588, 612, and 638. Your middle score is 612, as scored by TransUnion, for example. This is below the 620 score that many lenders use as a cutoff to qualify you for the preferred mortgage products. Now you might be wondering why you wouldn’t meet that 620 guideline since one of your scores is 638. In this case, because 638 is your highest score, it is, in effect, disregarded. Now that you know that you need to raise that 612 to at least 620, you can map out a strategy that focuses on your TransUnion credit report. Although you should try to fix all three credit reports concurrently, your TransUnion report will likely get you above 620 the fastest. It’s not as important to try to raise the 638 (although you should try anyway).

Even if 638 skyrockets to 700, your middle score will still be 612. Your individual situation will vary. Your middle credit score might be from any of the three credit reporting agencies, not just TransUnion, so keep that in mind. Be aware that credit score is not the only thing you need to worry about. People have qualified for FHA mortgages with scores as low as 580.

You must look at the entirety of your situation, including income, assets, equity, job stability, etc. Just because you’ve had a late payment, a collection, or even a bankruptcy on your record, do not automatically assume that you’re a subprime borrower. Also, don’t rely on the mortgage company to tell you whether you’re a subprime borrower. Know your own credit situation first. You might just find yourself qualifying for the very same mortgages as people with perfect credit.

Debt consolidation companies are a dime a dozen, especially today. These companies have been hugely-successful because the number of people in debt has been growing steadily. The same people would try to manage their debts through debt consolidation methods. Some succeed easily enough while others fall into more debt trap.

Before deciding that debt consolidation is right for you, make sure that you are well-informed about it. For starters, you should know that there are many debt consolidation dangers including the following:

False Promises
There are certainly plenty of debt consolidation companies which will offer you too-good-to-be-true deals and chances are, they are. These companies are in the business of advertising that debt consolidation loans will provide you with so much convenience, you will have to wonder why you never considered them from the beginning. Although debt consolidation is really an effective way to get rid all your debts, you should remember the responsibilities that come with it. Even though the consolidation company will offer to do everything for you, you will have to understand that it will take a deep lever of commitment in order for this to work.

Hard Money Loans
Debt consolidation loans are really designed for people with credit problems. These loans are usually offered with a higher-than-standard interest rate. Although you can arrange the monthly payments to be smaller compared to what you have been paying in total, you might end up paying more than what you initially thought. To determine whether you will actually be saving money, you should try and compare the offers of several different companies. You can simply request a quotation from these debt consolidation companies and look at their best offers side by side.

Falling for Balance Transfer
Applying for balance transfer can show up in your credit report and cause you to lose precious credit points. If your application for a balance transfer is denied, you will still have to deal with all your debts. Unfortunately, your credit score may have been affected already by the balance transfer application and taking out a personal or home equity loan will mean higher interest rates and bigger monthly payments. If you do get approved, you will only enjoy the low interest rate for a pre-determined period and if this period is over, you will be paying a much higher interest rate.

When considering debt consolidation, it is very important that you are aware of the current status of your finances. Weigh available options carefully and make sure that if you do decide to apply for a debt consolidation loan, you can shoulder the responsibilities of paying it. Otherwise, you are just asking for more problems and this time your luck might run out.

It is quite common for people to experience financial difficulties especially during times of unemployment, divorce or even during medical emergencies. Some people manage to get back on track and pay off all the debts incurred while others find themselves with a huge debt that they can not pay. For those people who want to be rid of their debts and be financially free, debt consolidation might be the answer.

When talking about debt consolidation, one should really consider the benefits it provides. Many people with bad credit have discovered that it could be the most effective way of managing debt, thus avoiding more serious financial problems. Debts owed on your credit card or mortgage could soar to exorbitant amounts. If you fail to pay on time, you will even be in more trouble as these credit card companies will charge you late payment and over-credit limit fees. The amount you originally owed will double in no time at all.

With debt consolidation, all these can be avoided. It is important, though, to understand that you will still have to de disciplined. To get rid of your debts, all you need to do is to take out a debt consolidation loan. This loan will be used to pay off all the money you owe your creditors, leaving you with just this loan to repay. Of course, you should expect that this debt consolidation loan would come with a higher interest rate. This is really understandable. Remember that the debt consolidation company will be taking a risk in approving your loan especially since you have poor credit rating.

Before considering debt consolidation, you should first sort out your finances. Make sure you are aware how much money you can shell out each month so you will also know how long it will take you to repay your new loan. If you need to cut back on your spending habits or change your lifestyle, then do so. In case you have difficulties working all these put by yourself, some debt consolidation companies can provide you with advices and tips in order for you to determine these things easily.

Once you have determined these things, you can now look for a debt consolidation loan provider. The best way to go about this is to compare offers from different companies. In fact, you can even ask for quotations for free. This quotation will show you in detail how much the company will be charging you for the interest and how long you are suppose to pay the debt consolidation loan.

Other companies would even provide information on the terms and conditions that you will enter into, should you decide to get one of these loans. It would also be to your advantage if you require your debt consolidation loan provider to include a guide on the process of debt settlement. If you make sure that you will not default on your loan then you are genuinely on your way to a financially free life.

Do you have too much credit card debt?  Perhaps you’re on the brink of entering this predicament, where you are already months behind on some of your payments. There are a few steps you can take to dig yourself out.

First, write out all of your debts, including payments, balances owed, and interest rates. Include your mortgage or rent and every utility bill & cell phones, gym memberships, cable TV, car insurance, everything. Take inventory of everything you pay out. With everything listed, prioritize which liabilities are the most important. Obviously, mortgage would earn the top spot on your list. Next would likely be your utility bills. Water, electric, and gas are absolute necessities. After utilities, any car loan you might have would be pretty important, although you can look to reduce this expense.

For example, you can sell your car and purchase a less expensive one. Hopefully, the new car will also be fuel efficient and less costly to insure. Once you’ve budgeted for life’s top priorities, it’s time to start cutting the fat. See if there is anything you can cancel without penalty. Gym memberships, cable television subscriptions, magazine subscriptions, and even cell phones are not categorized as bare essentials. You can get television over the air for free. You can work out at home. You can go to the library or browse the bookstores to read magazines. You can get a pre-paid cell phone plan that doesn’t require a monthly commitment. Remember, once your financial affairs are straightened out, you can always re-subscribe.

This brings us to your credit cards. It is always important to pay all of your debt on time. However, if you are truly overextended, this may not be possible. If you know that you need to miss a payment on at least one or two cards, you should be proactive with your creditors. Call each of your creditors and honestly explain your financial situation. Let them know that you will likely miss your next payment. Don’t make weak excuses. If you have a true hardship, you might find that your creditors might be willing to work with you. After all, it is in their best interest to do so. If you’re already behind, many creditors will arrange a payment plan to help you to catch up. Let them know that you are sincere in your sentiment to bring your account current. Tell them how much you might be able to afford every month. Inform your creditors that you fully intend to catch up.

Before you do, however, make sure you know exactly how much you can afford and stick to that number. Unfortunately, it becomes a game of hardball. Either they have to accept a lower payment, or they accept no payment at all. If they agree to a lower payment, make sure you get the terms of the payment plan in writing. Some companies might charge you interest or penalties & in arrears. This means that they’ll tack on the missed interest payment at the end of your loan, although this mostly applies to installment loans like car loans and mortgages. If your situation is particularly dire, some creditors might allow you to skip a monthly payment or two, although this is rare. If they do offer it for you, be sure to get it in writing. You do not want to rely on the word of a customer service rep who might be working in a call center overseas.

Whether looking to request a payment plan, reduced payment, or a skipped payment, be persistent. If you don’t get the answer you’re looking for, call again. Most credit card companies are so large that you will never speak with the same person twice. Just because they all work for the same company doesn’t mean they all know what’s going on with your account. Call center workers have varying degrees of experience and responsibility. You just might get a different answer.While you’re looking to negotiate with your creditors, keep an eye on your credit scores. You want to be able to minimize the damage to your credit. In fact, if you have a little time before you have to miss a payment, get a copy of your credit report to see what your credit picture looks like. If your score is a little low, look into ways to increase your score in the quickest amount of time. Then, you might be able to secure a debt relief loan to consolidate your debts.

If you have debts, it is natural that the creditor would try to collect. In order to collect, the creditor would use all means necessary including filing a case against you. You will be given 30 days to dispute the claim made against you. If you really owe the money, you should immediately try to contact your creditor in order to make a new payment arrangement that would be amicable to both of you. You will pay off your debts as longs as they agree not to press charges. You should do this in order to avoid a judgment record on your credit history.

Whenever a debt remains uncollected, your creditor could take you to court. If you were found liable, then a judgment will be issued in favor of your creditor. You will be given another 30 days to file an appeal although it would be a waste of time, if the debt is really your responsibility.

Judgments like collection accounts, charge-offs and bankruptcies can lower your credit score significantly. A ruined credit report will mean difficulties in proving your financial credibility. Even as something as simple as credit card application can be rejected if you are not careful on how you handle all your credit. Removing judgments can actually be done in three ways.

Check Out the SOL

You should determine the SOL or statute of limitations for judgments in your state. On the average, these judgments usually stay on your credit report for seven years but its statute of limitations can last for longer. This is also the length of time that your creditors will have to try and collect the debt you owe them. If the SOL has expired, the judgment should be removed from your credit report if there were no renewals filed by the creditor. Any dispute should be reported immediately so that your credit history is updated and corrected.

Another way you can remove the judgment from your credit report is by negotiating with your creditors. In exchange for the payment of the debt, your creditor will have to request the dismissal of the judgment. The judgment entry will be removed from your credit report completely. Normally, when debts are paid after a judgment has been issued, a rating of “paid judgment&” is entered. But if you negotiate removal then it would work wonders for your credit score. Of course, you have to document such agreement so that you will have something to show the credit bureau in case your rating did not change.

Lastly, you can remove a judgment by filing for a motion to vacate. In most cases, this motion is filed if the creditor sued you wrongly. If the court vacates the judgment then it will be removed from your credit report and you are not even obligated to pay your debts.

Learning about judgments is very important if you want to have a fighting chance of removing it from your credit report and protecting your credit score.