State Specific Question About: NORTH CAROLINA (NC)

The only way to avoid this type of judgment from going on your personal credit report is to lease your properties under an LLC.

And judgments, whether paid or not, do great harm to your credit score and credit profile. A judgment is pretty much in the top three of things that destroy your credit (bankruptcy, foreclosure, judgments). Your score will drop and you won't be able to have a perfect score for 10 years now. Also, other creditors may take note and raise your interest rates. It does not matter to them whether or not the judgment is paid - all the payment will prevent is attachment to your wages or property.

When a judgment is reported on your credit report, your credit report is damaged. Paying the judgment removes the monetary obligation, but the damage is done to your credit report and credit score as the judgment is a matter of public record and WILL be reported on your credit report for the next 10 years. The judgment will show that it is satisfied, but in the eyes of the FICO model, it's just the same as an unapid judgment. It's the same with chargeoffs. You may pay a chargeoff and it may have a $0 balance, but it still sits there for the statutory amount of time.

Surely a paid off tiny $130 judgement can't do much harm to the credit? or can it?

RR, yes, it can do awful damage to a credit score and report. The scoring model is not looking at the amount. The scoring model is looking for collections, judgments, foreclosures, bankruptcies, liens, etc. It could be $1 or $1,000,000 and the scoring model looks at it the same way.

In today's economy you can bet a judgment being put on a credit report is a big deal. Creditors are looking for ways to close accounts and raise interest rates. The presence of a judgment, whether satisfied or not, is a significant risk to creditors.

I would be willing to bet that if Audrey applies for credit right now, there is a very high chance she will be declined due to the presence of a recent judgment.

Interesting converstion. Here is what I got of Wiki Answers:

Legal entries, like judgments, tax liens, bankruptcies and foreclosure cause significant deductions to an individuals credit score. These entries are a gigantic indicator of risk. Risk is what credit scores are all about.

Try to think of the situation in an objective manner. If you were thinking about lending to someone and found out that another creditor had to sue them to recover money; do you think you'd reconsider before making the loan or possibly charge more interest to offset the perceived increase in risk?

As far as credit is concerned, with any legal entry, being paid is simply a footnote. What needs to take place is for the proper DISPOSITION to be recorded. In the case of a judgment, the disposition is either a "Satisfaction of Judgment" or an "Order to Vacate Judgment" (dismissal). Call the courthouse where the judgment was recorded and ask the procedure (which varies from jurisdiction to jurisdiction) for obtaining the disposition appropriate for your case. More than likely, you will have to show proof of payment. After you obtain the disposition, be sure to take the additional step of having the new document recorded. There is usually a small fee for this, but it's well worth it. Recording this document will (hopefully) ensure that the disposition ends up on your credit report to "tie up" the legal entry in a nice bow.

It's also a good idea to forward a copy directly to any credit bureau reporting the judgment, just in case.

Reid, I agree that it is wise to have a relationship with a community bank. While community banks make local decisions with many decisions based on the relationship you have with the bank, I do hope you will understand the importance of a healthy FICO score as well.

Unless you can get every product and service you need from a local bank who doesn't use FICO, a poor FICO will cost you thousands more over someone with a healthy score.

It is not only banks who use FICO scores. These scores are used by insurers, employers, credit card companies, cell phone companies, utilities, etc. Anyone who has been deemed to have permissable purpose has access to your FICO score.

While it's good to know you can go to your local bank regardless of your score, people should not be painted into a corner by their FICO score. Regardless of who you are and what you have in life - you will need credit somewhere someday.

There have also been known instances of the FICO score being used to characterize defendants in lawsuits. It is theorized that if a person is poor with money handling and cannot maintain their credit, this affects their general character and reputation as well. What's going to happen when landlords who may not have perfect credit get dragged in front of a judge in small claims court and start complaining about their tenants being poor tenants, etc. and the judge starts referencing the landlord's low FICO score to characterize the landlord. This isn't a widespread practice at the moment but the day is coming.

Audrey, at this point since it is already on there, make sure it is showing as satisfied. The damage is done to your credit, but if you buy or sell a house, you don't want it coming up in a title search because the slack courthouse attached it to your home.

There is a much easier solution to this which I'm not going to give out at this point.

Reid,

Your local bank that doesn't use FICO scores opens quit early I see.