Erase black mark from credit report

Q: I have had a judgment of $8,600 on my credit report for the past six years. Although the judge ruled in favor of the plaintiff, I never owed that money and I believe I lost only because I didn't have an attorney. Now, I wish to become a first-time homebuyer.

My credit union tells me I could qualify based on my credit score and income, but I would have to pay off the judgment or arrange to make payments with the creditor before the credit union would preapprove me for a loan. I contacted the creditor's attorney, who was sarcastic and said he couldn't force his client to respond to my payment proposal. I asked him to counteroffer if necessary, but I haven't heard from them in two weeks. I really want to buy a home but this presents an obstacle. What should I do now?

A: I'll give you a short answer and a long answer. If you really want to buy a home now, and are otherwise ready to do so, pay the $8,600. Get that mark off your credit report, get closure and get on with your life. Since you asked the question, though, I'll assume you can't lay hands on a spare $8,600 to vanquish the matter entirely.

Mindset Management

You must get closure, mentally, on the issue of whether you owed the money in the first place, why you lost the case, and any other such issues. It's no longer relevant, and hasn't been for six years. Your job now is to stay very results-oriented and fixated on your goal of getting this thing resolved, not only so that you can buy a home but so that you can move to the next phase of your life. Let that attorney's sarcasm and the refusals to counteroffer, etc., roll off your back like water off a duck's -- do not be moved from your mission to get this resolved. No matter how frustrated you get, stay in contact with the attorney and keep on issuing proposals until you've reached a settlement or payment arrangement with them.

Need-to-Knows

Money talks. When negotiating to settle these sorts of judgments, you're better off if you can offer some large lump sum less than the full amount to totally settle the deal, rather than making small monthly payments over a long period of time. While it's easy for your creditors to turn their nose up at $100 per month over 86 months, most people and companies in America now could use a good chunk of cash, so it's a lot harder for them to ignore or reject a lump-sum settlement offer for half or even a quarter of the judgment.

Also, derogatory entries on your credit report expire off the report after seven years, and you've said that you've been dealing with this judgment on yours for six already. Through some strategic timing, you might be able to have your mortgage lender run your credit report after the entry has expired off your report and qualify for your mortgage even before the judgment issue has been resolved. It's possible, although a good mortgage broker would likely be more effective at coaching you through that process than the loan rep at your credit union. ...CONTINUED

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