In U.K., unheeded court order can clobber your credit
Dear Credit Score Report,
Please help! I feel I am a victim of circumstance. I have had multiple sclerosis for many years and always had an excellent credit score until now. Following a relapse of MS, I have now gone into progressive MS and lost my job and home. I have received a pension and payout from my employer which took 12 months to resolve. During this time, I was with a debt management company and have now settled all outstanding finances. Due to this, my credit score is bad. Is there anything I can do to correct this torture of not being allowed credit? A CCJ was issued, but was paid and settled prior to court hearing. -- Ian
Unfortunately, you are among many who have suffered credit score damage as a result of poor health. And by mentioning a county court judgment (CCJ), I presume you live in the United Kingdom, and while your country's credit scoring system means the damage may linger for years, experts say you can still work to rebuild your credit.
In Britain, a creditor can take action against you through a county court in an attempt to be repaid. As the borrower, you receive a letter informing you that a CCJ has been issued and that you owe a creditor money. By paying the debt in full within a month, you can avoid a judgment against you and any long-term hit to your credit. If you take longer than a month to pay, you get a major black mark against your credit.
Your letter says that you paid what was owed before you had to go to court, but it doesn't specify whether you did so within a month's time. That detail can mean the difference between still qualifying for loans and being denied any new credit for years.
Although I've attended football (not soccer!) matches in London and Norwich, eaten Aero chocolate bars and enjoyed watching old episodes of Alan Partridge, there's still a lot about your country I'm no expert on -- including the credit scoring system. However, I do have access to people who are more knowledgeable. "A county court judgment is a serious matter there and has a very negative impact on a person's credit score," says David Jones, president of the U.S.-based Association of Independent Consumer Credit Counseling Agencies (AICCCA). However, if you pay the debt within one month after receiving the CCJ, you can apply to have the entry changed to show that you've paid (or "satisfied") the debt. Jones says although there are legal judgments regarding past debts handed down in the United States, "there is nothing like a CCJ in U.S. law in the sense that such a serious and lengthy hit to a debtor's credit score results," he says.
If you don't pay the debt in that one-month period, the "CCJ usually makes it impossible for a consumer to get any form of credit for at least six years," Jones says. Assuming you didn't pay the debt quickly enough, that likely explains your difficulty securing new credit. But I still want to commend you: You've done all you could when faced with a tough situation. Now, you may need to wait for your score to recover. In the meantime, you must apply good borrowing habits to encourage that process.
To begin, contact the debt management company to see if they can offer any help in rebuilding your credit. "Although AICCCA has no members in Great Britain, Ian could also contact a counselor from our member Money Management International, which does has an affiliate in the U.K.," Jones says.
Since you say you ultimately paid your debt -- even though it may have taken longer than a month -- there may be some lenders willing to work with you. For example, you may be able to qualify for a prepaid card or debit card from your bank, Jones says. He also says that you may be able to get a store brand credit card that reports your on-time payments and helps your credit score to recover. There's no guarantee that you'd qualify for any of these, but since they are typically not as hard to qualify for as a standard credit card, it may be worth a try. Meanwhile, don't miss any payments to businesses or creditors. "He should make sure that all his bills (rent, car loan, etc.) are absolutely paid on time," Jones says in an email.
Otherwise, you'll just need to be patient as your credit score recovers from these challenging circumstances. "It's going to take time and diligence and Ian will be paying some higher interest on whatever credit he is able to get for awhile," Jones says.
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