No one wants to be sued over debt, and the costs of going to trial can be prohibitively expensive. If you know you owe the money, you can save yourself some hassle by agreeing to a stipulated judgment. The judgment will become a public record, so it will affect your credit score. If you're being sued by a creditor, though, it's likely that your credit score already has taken a hit.
What is a Stipulated Judgment?
A stipulated judgment is any judgment issued without a trial. In many jurisdictions, formal settlement agreements are referred to as stipulated judgments. In some cases, though, the judgment is not the result of a negotiated settlement. Instead, it's the civil equivalent of pleading guilty. You'll admit you owe the money and the judge will enter an order itemizing how much you owe and, in some cases, how and when it must be paid.
Stipulated Judgments and Credit
Stipulated judgments always will affect your credit if you've been sued by a creditor. Public records such as judgments go on your credit report, but if you pay the judgment in a timely fashion the payment should be noted as well. If, however, you agree to a stipulated judgment in another matter -- such as an employment or contract dispute -- it won't go on your credit report unless you owe someone else money.
Alternatives to Judgments
A judgment requires you to pay the money, so you can head off the credit effects of the judgment by simply paying the balance owed upfront. You also may be able to negotiate a settlement agreement or repayment plan with your creditor. These agreements typically go on your credit report, but are less harmful to your score than a formal judgment, particularly if you regularly make payments as agreed.
How Long the Effects Last
As time passes, the effect the judgment has on your credit will decrease, particularly if you open new accounts and begin paying your bills on time. Public records remain on your credit report for seven years, with one exception. If the stipulated judgment results in a tax lien, it can stay on your credit report permanently.
- MyFICO: How Long Will Negative Information Remain on My Credit Report?
- New Economy Project: Housing Court Records and Your Credit
- U.S. Legal: Stipulated Judgment Law and Legal Definitions
- Consumer Law, Cases and Materials, 4th Edition; John A. Spanogle, Jr. et al.
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