How does a court judgement affect your credit score?

Credit bureaus such as Experian and Equifax create credit reports containing information about your financial and credit history. Lenders, banks and other businesses can request this information under specific circumstances, such as when you’re applying for some form of credit or loan. Lenders will then use these reports to determine if they’re willing to grant you credit. 

Usually, your credit report includes: 

• Your repayment history
• Any credit enquiries you’ve made over a particular period
• Writs and summons
• Overdue accounts that are listed as defaults
• Court judgements related to debts

A debt-related court judgement is when a judge gives a verdict that you have to pay back a debt you owe to your creditor, with interest and any legal costs. After the verdict, your debt becomes ‘judgement debt’, which must be repaid within a time frame often laid out in the judgement. 

A judge will usually issue a judgement against you and in your creditor’s favour when:

• You did not file a defence.
• You missed a court hearing.
• The creditor proved supporting documents that the debt is due. 

A negative court judgement listed in your credit report denotes a financial dispute between you and a creditor. This means potential lenders might be hesitant to approve your credit when they see it on your report. Moreover, the court judgement also acts as a negative mark on your credit file and, therefore, negatively impacts your credit score as well. 

Only debt-related judgements appear on your credit report, which means any other type of judgements or your criminal record doesn’t affect your credit score. 

Even after you’ve settled your judgement debt, the court judgement might still appear on your credit report. Follow these steps mentioned to rectify this and work to remove the judgement: 

• Notify your credit provider that held the debt 

The first step is notifying the credit provider that held your debt that it has been repaid, then you have to ask them to provide a written statement that the debt is settled. It’s important to get a statement from your credit provider to prove that you have fully paid the judgement debt. 

• Notify all credit bureaus

Once you have the statement from your credit provider, you can use it to notify all credit bureaus. Australia has three credit bureaus, Experian, Equifax and illion, and it’s best to notify all three to ensure no ongoing impact. You can ask them to remove the judgement from your record. The written statement should be enough for most agencies, and no further steps are required.  

• Ask the credit provider to sign a consent order 

Suppose the credit bureau refuses to remove the judgement even with the written statement from your credit provider. In that case, you can ask the credit provider to sign consent orders that state that both the parties agree to discontinue the proceedings and set the judgement aside. You can then file the consent order with the appropriate court registry. If everything is in order, the court will set the judgement aside and notify the credit bureaus to update their records. 

• Apply to the court 

Suppose the credit provider refuses to sign the consent order. In that case, you can apply to the court directly. You can then submit the written statement from the credit provider and any other proof you have that you have settled the debt. If the court rules in your favour, the judgement will be set aside, and the credit bureaus will be asked to update their records.