How to Remove a Judgment From Your Credit Report

Businesses and individuals may not think twice about the impact of a court judgment against them. However, a court judgment may be an issue when applying for a loan, a credit card or even a line of credit with a supplier. Being rejected for credit may mean that your plans to renovate your house or expand your business have come to a grinding halt. This article explains how you can remove a judgment from your credit report to ensure you can get your plans back on track.

Contents of Your Credit Report

When you submit a credit application, businesses or financial institutions typically check your credit history through a credit reporting agency. The information in the report influences whether or not they grant the application.

Your credit report contains a history of your:

• repayments (for example, on loans);
• overdue accounts;
• writs and summons; and
• court judgments.

Remove a Judgment From Your Credit Report

While some credit reporting agencies may remove a judgment if you provide evidence of the repayment of a debt, credit agencies such as Equifax will not. Unless the judgment on your report is incorrect, it is challenging to remove a judgment before its automatic removal. Depending on the type of judgment, the automatic removal date ranges from two to seven years.

A judgment remains on an Equifax credit report for five years, whether or not you pay the outstanding amount. Upon notifying Equifax of your payment of the debt, they add a notation to the judgment. Unfortunately for you, the notation is not helpful when it comes to obtaining credit.

However, the judgment is considered incorrect and thus removed if:

• whoever obtained the judgment (the judgment creditor) agrees to set it aside; or
• a court sets aside a default judgment.

Setting Aside a Judgment By Consent From a Creditor

In some instances, a judgment creditor will agree to sign consent orders to set aside the judgment. If so, they need to file the orders in court. After filing the orders, the credit reporting agency receives an automatic notification and can update your credit report.

However, many judgment creditors like banks and other lenders are often reluctant to provide consent to set aside and remove a judgement. Obtaining consent is even more difficult if you have not completely repaid the debt.

Despite this, the creditor may agree to sign consent orders to set aside a partially paid judgment debt if you enter into a deed of settlement. A deed of settlement typically permits the creditor to obtain a new judgment against you if you default on the deed.

Applying to the Court to Set Aside a Default Judgment

A default judgment is a court judgment against a party who has not filed a defence. In the absence of a defence, an applicant may request the court to enter a default judgment.

Setting aside a default judgment is easier said than done. Many assume that, upon compliance with the judgment by paying a debt, they have a right to have the judgment set aside. Unfortunately,  there are limited circumstances in which you can have a default judgment set aside.

Circumstances Where a Default Judgment is Set Aside

It is useful to first seek clarification from a judgment creditor before applying to have a default judgment set aside. If you pay all costs in relation to the debt, it is unlikely that a judgment creditor will oppose your application to the court.

Even if a judgment creditor has no issue with you applying to the court to set the judgment aside, you must address the following criteria in your application.

1. Why You Did Not File a Defence in Time

You will need to provide a satisfactory reason as to why you did not file a defence within the 28-day time limit set by the court. There are many valid reasons for not filing a defence, some of which may include:

• not being served with the claim and therefore not being made aware of the claim;
• you were in hospital and unable to file a defence; or
• you were overseas and unable to file a defence.

2. Whether You Have a Genuine Defence

You do not need to show that your defence will be successful. However, you must show the court that you have genuine grounds to defend the claim. Genuine grounds for a defence may include that:

• you do not owe the debt; or
• the amount claimed is incorrect.

The threshold to establish a genuine defence is relatively low. However, you must support your application with an affidavit and factual evidence such as payment receipts.

3. Why You Delayed Making the Application (if Applicable)

If there is a delay in the application, you need to address it. You must convince the court that you will suffer disadvantage if you cannot argue your defence.

When a Creditor Takes Enforcement Action

If the judgment creditor is in the process of obtaining orders to enforce the judgment, you cannot apply to set aside the judgment.

However, you can make an application to ‘stay’ the proceedings and then proceed with your application. A ‘stay’ application prevents the creditor from enforcing the judgment until your application to set aside the default judgement is dealt with.

Key Takeaways

Judgments on your credit report may hinder your ability to obtain a loan,  credit card, or even a line of credit with a supplier. You can remove a judgement from your credit report by:

• seeking consent from a creditor; or
• applying to a court to set the judgment aside.