A small claims court judgment against you is recorded on your credit report. These civil judgments are automatically sent to all three credit bureaus and often result in significant negatives on your credit report. Civil judgments will remain in the public records section of your credit report for at least 7 years – after the judgment, not the date of the debt.
A small claims court judgment will go on your credit report for seven years following the date the judgment was entered.
Credit Bureaus Get Public Information
The courts do not need to specifically report to the three credit bureaus. Since civil judgments are public records, the credit bureaus can assemble their own data on small claims dockets. Unfortunately, the debtor often must update his records to prove that the outstanding debt has been paid. A paid judgment, while still a strong detriment, is much better than an unpaid debt.
Credit Report Damage
Small claims judgments usually damage credit reports in multiple ways. First, a negative public record, resulting from a civil judgment, is among the most negative comments on a credit file. Second, if the law suit and judgment result from a reported delinquent credit account, negative information about that account often remains in the file, adding another damaging entry. Should the debtor not appear at trial date, the court enters a "default judgment" in the record. Default judgments are even more damaging as it appears that the debtor didn't even bother to attend the trial.
Statute of Limitations
The statute of limitations (SOL) can be important in small claims actions – or the avoidance thereof. Unfortunately, the SOL can be long – even 12 to 20 years. Sometimes, however, the SOL can be renewed, starting the "clock" over from the beginning. However, if you are sued for an old debt, it is worth checking the SOL in your state. Should a legal action be initiated after the expiration date, you can advise the court and have the suit dismissed.
Avoid default judgments. Even if you owe the money claimed, the SOL has not expired, and you cannot pay the monies due in full, you should attempt to settle the issue. This will avoid trial and a small claims judgment posted on your credit report. Remember, the plaintiff – creditor – does not care about your credit report. The creditor only wants monies due. You can probably work out a settlement prior to trial. If you owe the monies claimed and neglect to appear at trial, your credit report will be damaged for many years in the future.