Credit Q&A: Can a Lawsuit Hurt My Score?

Q: Will a lawsuit affect my credit score?

A: It depends whether the person filing against you is able to get the court on his or her side. This is because, as Equifax and Experian have confirmed, court judgments are reported to the credit bureaus and end up on your credit report, but lawsuits do not.

However, keep in mind, a judgment can be filed against you if you don’t respond directly to the lawsuit.

“If you don’t respond, you lose by default,” John Ulzheimer, president of consumer education for SmartCredit.com, says. He explains that most of the time, defaulted judgments get reported to the bureaus and can impact your score.

If you respond to the lawsuit, your score will remain intact as the case works its way through the judicial system, which could take months or even years. Then, if the suit is dismissed or if the judge finds in your favor, it won’t be reported.

Whether it’s by default or because the court found fault against you, a judgment appearing on your credit report will cause your score to take a significant hit. Ulzheimer explains that, generally, the judgement will have the same impact as a foreclosure, with a drop of up to 160 points, depending on your current credit score. Those with a lower score would take less of a hit to their score, but only slightly.

“The judgment stays on your report for seven years from the date it was filed,” Ulzheimer says.

Want to know what affects your credit score? Email your questions to editors@mainstreet.com.