How much can your credit score drop due to a lawsuit?

Posted by: Aiden white on

A credit card lawsuit can be pesky. It can make your life hell. The legal paperwork, the excruciating trials, attorney fees, etc. can create turbulence in your mind. But above all these things, there is yet another sector which can derail your already unstable financial life. And, that is your credit score.

Creditors file a lawsuit against you when you have not shown any sign of making payments on your delinquent debts for almost 180 days. Initially, creditors send your account to the in-house collection department. You get collection calls from the in-house collection department for several days. When you refuse to make payments even then, creditors decide to file a lawsuit against you.

But how does a lawsuit affect your credit score? Delinquent debts have already dropped your credit score by now. A further blow on your credit score can throw you off the guard, which can be fatal.

Well, don’t panic. In this post, we will tell you how a lawsuit affects your credit score and what you can do about it. Knowledge is your greatest weapon. It can help you to fight the biggest battles smartly.

How a lawsuit affects your credit score

Well, Equifax and Experian don’t report lawsuits to credit reports. This means they don’t hurt your credit score. However, there is a catch.

If you don’t answer the summons, then creditors can win the case easily. In that case, the judge will issue a default judgment against you, which gets reported to credit bureaus and ultimately to your credit report. This hurts your credit score.

Bankruptcy, tax liens, and judgments can drop your credit score by 150 points or more. So, if your present credit score is 700, then a judgment can pull down your credit score to 550. Jeez! That’s a big drop in your credit score.

What if you respond to the credit card lawsuit? Well, if you give a reply to the lawsuit and attend the court hearings, then your precious credit score won’t drop until the case is resolved.

The judicial system has its way of working. It could take several months or years to resolve a case. There won’t be any effect on your credit score until your credit card lawsuit is resolved successfully. If you lose the case and the judge issues judgment against you, then your credit score will drop by about 150 points. And, if you win the lawsuit and the court doesn’t issue a judgment against you, then your credit score won’t drop. But that doesn’t mean your credit score will go up too. Your credit score won’t increase until you build positive credit.

How to build positive credit

When your credit score is low due to judgment or delinquent debts on your credit report, you can use the following tips to rebuild credit.

  1. Reduce credit utilization ratio by paying off debts.
  2. Make timely payments on your credit card bills.
  3. Remove the inaccurate negative information from your credit report.

How to avoid a credit card lawsuit

A credit card lawsuit is not good for you – both emotionally and financially. So you should always try to avoid a credit card lawsuit by all means. Here’s how you can do that

  1. Pay your credit card bills on time.
  2. Take care of your delinquent debts before creditors file a lawsuit.
  3. Use effective get out of debt strategies to save money and avoid a lawsuit.

Conclusion

A judgment affects your credit score and appears on your credit report for 7 long years. That is quite a long time. If a creditor or a collection agency has filed a lawsuit against you, then consult an attorney and give a reply to the summons within 21 days. That may help to avoid a judgment for some time and safeguard your credit score.

7 Ways To Protect Your Credit From Identity Theft!

Posted by: Aiden white on

Hey buddy! Do you remember every store or website you have swiped your card?

Well, I know that it might not be possible for you! But you know what? Thieves and hackers can strike anywhere and at any time!

Yes, you heard it right! I think, barely a month goes by without seeing a major data breach hitting the news headlines! By the way, is your financial data safe?

If you have any doubt, then you should be more cautious to safeguard your information to prevent identity theft. And take some concrete steps to take if you are already a victim!

So, here we have listed some of the best possible measures you can take to protect your credit from identity fraud!

Let’s start!

Freeze your credit

A credit freeze can help you to protect yourself from identity theft by blocking access to your credit reports. You need to inform all three major credit reporting bureaus to restrict access to your records. Such that, new credit lines cannot be opened unless and until you unfreeze your account.

Let me tell you, freezing and unfreezing your credit at each bureau comes free of cost! Usually, you need to provide your Social Security Number (SSN), birth date, etc. that confirm your identity. You can use a PIN or password to unfreeze your credit when you need it!

Go through your credit report at least thrice a year

The baby step to protect your credit from identity theft is to stay informed! You can get a
free credit report from each of the credit bureaus once a year.

To stay well-informed about your credit reports, you can get a report from one bureau at the beginning of the year, another in the middle, and another at the end of the year.

But why will you do so?

If you check your credit reports often, you can identify any odd activity that might pop up. Here we have listed some of the identity theft red flags which you should look for on your credit reports:

  • Sudden activity on your inactive accounts
  • A new line of credit which you haven’t opened
  • Wrong personal information
  • A credit inquiry you have not applied for

So, if you see something odd on your credit report, you need to take immediate action! You have the right to dispute any incorrect information.

Contact the concerned credit bureau along with supporting documents so that they can look into the issue asap!

Enroll in a credit monitoring service

Are you eligible for free credit monitoring?

Well, if you are not, you don’t need to worry! You can purchase credit monitoring! You can find many credit monitoring companies that will charge you a monthly fee of around $30. But I would suggest you review the services included before signing up with a credit monitoring company.

But what is meant by credit monitoring?

Well, credit monitoring keeps a tab on your credit reports and alerts you of any change in them. If someone tries to use your data to open a credit account, you can know right there instead of any data breach later on! So, you can enroll in a credit monitoring service for credit card fraud protection.

Don’t access any unsecured Wi-Fi network

You might be enticed to access the free Wi-Fi while taking a sip in your cup of coffee in a cafe! But you should refrain from using these public Wi-Fi networks because it’s unsecured! Anyone who is using that same open network can get access to your information.

I would suggest you wait until you get home! But make sure to secure your home WI-Fi with a strong password.

Else, anyone can hop onto your network and access your information. Don’t give a fraudster any opportunity to steal your information!

Protect your computer

You can protect yourself from identity theft by doing the following things in your computer or smartphone, like:

  • Use a firewall and a secure browser
  • Don’t download any files from unauthorized sources
  • Don’t use a free of cost internet security or antivirus
  • Put a separate password for any personal or financial information
  • Don’t create a password which is based on your available data (like your date of birth, anniversary date, etc.)
  • Stay away from opting for the auto-login process (which stores your login information)
  • Most importantly, when you are disposing of your computer, make sure to delete all your personal information and overwrite the hard drive.

Don’t use your debit cards for online purchases

Do you use debit cards for your online purchases?

Now, let’s say that your debit card information is hacked due to your stolen identity. And some purchases are made without your knowledge.

If you want to get your money back, you have to take up the issue with your bank. Whereas, with a credit card, the card issuer will fight to get your money back.

There are two laws to protect you if your card information is stolen and fraudulent transactions have been made

  • In the case of debit card transactions, the Electronic Funds Transfer Act (EFTA) is applicable. You will have up to 60 days to report a lost or stolen card under the EFTA. After that, you will lose whatever money you have lost!
  • On the other hand, for credit cards, your maximum liability for fraudulent transactions is $50.
    If there is a fraudulent transaction on your credit card, you don’t lose any money.
    You need to report the fraud to the credit card company and they will credit back the amount to your account. And most likely, the issue will never affect your bank account!
  • However, you need to use your credit cards wisely like making payments on time, keeping your credit utilization ratio lower, etc. Else, you might be vulnerable to fall prey to the debt trap

    But what if you are already a victim of stolen identity?

    If you are already a victim of identity theft, you can contact the major credit bureaus to place a fraud alert on your credit reports. This way, you can give a heads-up to potential lenders and creditors that someone might be trying to use your credit to apply for credit.

    A fraud alert is a statement in your credit reports that alerts anyone viewing the reports that you might be a victim of fraud or identity theft. This alert can lead the creditors to perform more thorough vetting before extending the credit line in your name.

    Usually, a fraud alert lasts from about 90 days to 7 years and notifies the creditors to confirm your identity before taking actions on your credit.

    So, what are you thinking?

    Check whether or not your data is safe at the earliest! And if you think that you are vulnerable to identity fraud, take the proper action immediately!