Beyond bad credit-struck by lightening twice

Lisa CCU RN, RN · Nov 27, 2005

There's no such thing as being judgement proof. Even if you can't pay, the judgement stays on the books. And that often means ... if you own a house, for example, they can put a lien on it and collect their money when the house is sold. Or, they can garnish your wages when you are employed. They can also put a lien on your bank account and get the money that way. It may take years but they can always catch up with you. So it's always better to avoid judgements and work out a deal whenever possible.

I'm sorry, but there is such a thing. It means that certain money paid to you like welfare, disability etc cannot be touched when you are sued. It doesn't mean you can't be sued, it just means they won't get the money. If you make under a certain amount a week, like $150 dollars, they can't garnish these wages. It really means if you are severely impoverished, they can't take all your money just to pay a debt. You have to be allowed a certain amount left over to live on. I know this because of my fight with my husband for child support. He is supposed to pay $500 a month, but he can only have 50% garnished. So he cleverly only makes a certain amount just so I'll never get my full $500. All these conditions are subject to change if your situation changes though. If you fast forward 10 years and you start making $50,000 a year then, yes they can garnish that, but only if the statute of limitations is not expired. There are always exceptions. If the creditor finds out she's in school and they can probably ask to have future wages garnished and get a judgment for the future IF the statute is not passed. That's why I suggest if they don't ask about it, she not say anything. If they do ask, then of course, she'll have to disclose it. Like I said though there is a such thing as being judment proof. Maybe a better name would be collection proof; they can sue but that doesn't mean they will get the money from a person who's financial situation will not change anytime soon. I got all this info from a lawyer and the only thing I don't know for sure is the ability to sue for FUTURE income AFTER statute of limitations is passed.

gauge14iv, MSN, APRN, NP · Nov 27, 2005

Part of your FICO is based on time - so anything recent will hurt you worse than anything past

gauge14iv, MSN, APRN, NP · Nov 27, 2005

CRNA - you are correct. They can sue, and they can get a judgement - but in most cases - depending on your state, there isnt anything they can do after that. They cannot attach your home, your property or your bank accounts unless your states law allows that.

The IRS is a whole other story however, as is a contractor you hire to perform work on your home or property.

Sheri257 · Nov 27, 2005

I'm sorry, but there is such a thing. It means that certain money paid to you like welfare, disability etc cannot be touched when you are sued. It doesn't mean you can't be sued, it just means they won't get the money. If you make under a certain amount a week, like $150 dollars, they can't garnish these wages. It really means if you are severely impoverished, they can't take all your money just to pay a debt. You have to be allowed an amount to live on to be left over to live on. I know this because of my fight with my husband for child support. He is suppossed to pay $500 a month, but he can only have 50% garnished. So he cleverly only makes a certain amount just so I'll never get my full $500. All these conditions are subject to change if your situation changes though. If you fast forward 10 years and you start making $50,000 a year then, yes they can garnish that, but only if the statute of limitations is not expired. There are always exceptions. If the creditor finds out she's in school and they can probably ask to have future wages garnished and get a judgment for the future IF the statute is not passed. That's why I suggest if they don't ask about it, she not say anything. If they do ask, then of course, she'll have to disclose it. Like I said though there is a such thing as being judment proof. Maybe a better name would be collection proof; they can sue but that doesn't mean they will get the money from a person who's financial situation will not change anytime soon. I got all this info from a lawyer and the only thing I don't know for sure is the ability to sue for FUTURE income AFTER statute of limitations is passed.

Well ... I've been on both sides of this issue ... both creditor and debtor. In two cases I won judgements against people who owed me money. In one case I put a lien on the guy's bank account and the bank emptied out his entire account. In the other case I put a lien on the guy's house. When he tried to sell the house three years later, I was paid.

Who knows? Maybe these stipulations vary state by state where different laws may apply. The only statute of limitations I was ever aware of was when you had to file a lawsuit within a year. But, as far as the judgement itself was concerned, there were no limitations on that, at least with my two cases.

:coollook:

Sheri257 · Nov 27, 2005

They cannot attach your home, your property or your bank accounts unless your states law allows that.

In California, Louisiana and Virginia, you can do that ... because, as I previously mentioned, I've done it myself with both property and bank accounts.

:coollook:

gauge14iv, MSN, APRN, NP · Nov 27, 2005

Yeah the laws are sort of odd in Texas...

For instance - I have a judgement for 3.5 mil against a guy who hit me in a drunk driving accident. I can't attach anything because he has nothing. I'll never see a dime of it. I'm surprised anyone writes loans in Texas what with the lack of protection for creditors.

DH explains FICO this way - it is a statistical formula run on a computer - more recent items carry more statistical weight - so updating the date of a past due item will make it weigh heavier and can drop your FICO score. For someone with say 22 good credit items and one negative item - that one item is not likely to do as much damage to the score as say it would for someone who only 3 lines of good credit and one negative. It's pretty complicated. The computer can only look at what is in the computer when computing the scores. Bankers use the scores as an indicator of ability to pay, willingness to pay and history of paying, and bank policy is written based on scores.

Faeriewand, ASN, RN · Nov 27, 2005

Really, your future is bright because of your education. :) And your getting great advice from everyone here! :) Keep your eye on that light at the end of the tunnel because you will make it there faster than you know.

Lisa CCU RN, RN · Nov 27, 2005

Well ... I've been on both sides of this issue ... both creditor and debtor. In two cases I won judgements against people who owed me money. In one case I put a lien on the guy's bank account and the bank emptied out his entire account. In the other case I put a lien on the guy's house. When he tried to sell the house three years later, I was paid.
Who knows? Maybe these stipulations vary state by state where different laws may apply. The only statute of limitations I was ever aware of was when you had to file a lawsuit within a year. But, as far as the judgement itself was concerned, there were no limitations on that, at least with my two cases.

See, the guy had an asset( the bank account). I'm talking about people who don't have anything in a bank account or for that matter don't have one at all. Being judgment proof would mean having no valuable assets like a house, car, bank account. I'm talking about broke people. The statute varies from state to state. Here in TN you have 6 years to get a judgment I think.

Sheri257 · Nov 27, 2005

DH explains FICO this way - it is a statistical formula run on a computer - more recent items carry more statistical weight - so updating the date of a past due item will make it weigh heavier and can drop your FICO score. For someone with say 22 good credit items and one negative item - that one item is not likely to do as much damage to the score as say it would for someone who only 3 lines of good credit and one negative.

So ... I guess it depends on how many negative items you have compared with the good ones. Since I never had that many bad items, paying the old bills wouldn't have damaged the score that much ... I suppose.

Still ... you gotta wonder why the old debt is listed there in the first place. Wouldn't they want to give people incentives to pay it by improving their scores? It doesn't make much sense.

:coollook:

gauge14iv, MSN, APRN, NP · Nov 27, 2005

Here is the info sheet DH uses for his clients -

BAD credit can disrupt your life. That’s why, in addition to paying your bills on time, it’s important to check the accuracy of your credit reports several months before applying for a mortgage or car loan. And these days, you also can find out your credit scores - the numbers lenders use to decide how likely you are to repay a loan.

WHY do you need to know you scores? Because the lower your scores, the higher risk you are to a lender and the less likely you are to get the best rates on loans. Checking your score with Equifax, Experion or Transunion (the 3 major credit reporting companies) before you apply for a loan can save you money if you catch a mistake and correct it. When you are buying a home, the difference between good scores and poor ones can translate into well over $100,000 over the life of a mortgage according to ***, president of ****, a nonprofit debt-counseling service.

MOST lenders initially use the Experion score system known as FICO, developed by Fair, Isaac and Co. Several factors go into your score, including bankruptcies, how many years you’ve had credit and the number of new credit applications you’ve made. Most consumers’ FICO scores fall between 300 and 850. Sixty percent score above 700; 27% score between 600 and 699, and 12% score between 500 and 599. The way lenders view scores varies from one institution to the next. But generally speaking, this is a rough guide to how your score may be perceived by a mortgage lender:

720 and above - EXCELLENT - you will get the best rates

680-719 - GOOD - lenders will be favorable, but you should make moves to improve your score further. Expect to qualify for rates ½ to 1% above Excellent ratings.

620-679 - AVERAGE - the lower your score in this bracket, the more collateral lenders will require and the higher rates you may get. Expect to qualify for rates 1-2% higher than Excellent. Commercial lenders will not accept your loan request below 680.

580-619 - SUBPRIME - scores in this range are often referred to as “A- credit”. You will have to put more down and pay far higher rates than most borrowers. If you score 590, for example, and want to but a car, any loan you get will carry a high interest rate. If the average rate on a 5-year car loan is 8% at the time you apply, expect to get a car loan for 11-13%.

BELOW 580 - Often referred to as “B/C-credit,” you can expect to only qualify for adjustable rate mortgages (ARMs). Consumers in this range will pay above 11% for mortgages and will need down payments of at least 20% to purchase homes.

MOVES to make a mediocre credit score or even a bad one better are not difficult. You can take steps to improve any credit score. The 1st step is to make sure that your credit history is accurate. Your scores are only as good as the information reported by your creditors to the credit bureaus. Each credit bureau may not have the same information. The 2nd step is to use the information on your credit history to improve your scores. Each credit bureau will list the top 4 reasons for why your credit score is where it is. You may find the biggest reason your scores are low is that the outstanding balances on your credit cards are too high compared to the total credit limits. Any credit score will improve if you pay off balances and pay on time.

Credit Scoring

35% of your score is based on payment history

1, Recent, 0-6 months, 7 to 24 months, 24+ months

2, Frequency

3, Severity

4, Currently late

30 % of your score is based on current balances

1, Above 75% of total balances (Revolving)

2, Above 75% on any one card

3, Best to be at 30% or below

15% of your score is based on history

1, Age of trade lines (a trade line is each creditor, Visa, MC, Mtg, car loan etc.)

2, Number of trade lines

10% of your score is based on Type / Mix

1, Mortgage, Installment & Revolving

10% of your score is based on inquiries

1, In past year

2, Mortgage & Auto have a 30-day buffer

Increasing your Credit Score

A good credit score can mean the difference between a low Mortgage rate with conventional financing and a restrictive, higher rate loan. There are some simple but very important steps you can take to clean up your credit.

1, Look for any past due balances on the report and bring them current, if reporting in last 24 months.

2, Reduce all outstanding debt to as close to zero as possible. If unable to pay all debt down, evenly distribute any remaining debt among open credit cards, or consider opening a new line and transferring some of the balances. Try to keep balances below 50% of available credit, below 30% would be even better. DO NOT CLOSE EXISTING ACCOUNTS.

3, If married, keep separate credit cards. This provides flexibility in transferring some or all of the balances to one spouse to increase the credit score of the other. This provides the possibility of one spouse becoming the sole borrower and it does not change the ownership of the home.

4, Request an increase in available lines on credit cards to reduce the debt ratio, but only if your credit card company will do so without a hard credit inquiry.

5, Pay off past due and charge offs within the last two years. Beyond two years it will have no impact on your score if wiped out. In fact, the act of paying it off can actually take your score down temporarily.

6, Request that creditors and credit bureaus delete any outstanding debt that is incorrectly charges to you or has yet to be cleared. They have an obligation to react within 30 days. If you choose to pay off an outstanding debt (less than two years old) mark the back of the check “accepting this check is evidence that the transaction is complete and this charge will be deleted from my credit” You may be able to use this canceled check if the outstanding debt is not removed.

Bipley · Nov 27, 2005

Still ... you gotta wonder why the old debt is listed there in the first place. Wouldn't they want to give people incentives to pay it by improving their scores? It doesn't make much sense.

I'm not sure they are looking for incentives to pay, owing money and the desire to make good on a promise is the incentive. A credit score should be to demonstrate if someone is willing to pony up to their obligations.

Lisa CCU RN, RN · Nov 27, 2005

Struck by lightning.... well that implys bad luck. Your situation was created by you. You bought something on time which means you couldn't afford it. And you abdicated your financial responsibility to others.
I think you will learn from past mistakes. Work hard for your money and save up. Pay with the cash you earn. If the money is not in the bank then you can't afford it.
Really, your future is bright because of your education. :) And your getting great advice from everyone here! :) Keep your eye on that light at the end of the tunnel because you will make it there faster than you know.

I wouldn't say she created the situation. Nowadays you are forced into getting credit. If you have NO CREDIT you are worse off than someone with BAD CREDIT and you'll get credit faster with bad credit than none at all. All she had was a computer and a school bill. I don't see that as being totally irresponsible. Life happens. She lost her job and she couldn't help that. If she never had bought anything on credit then she would be worse of than if she hadn't. Damned if you do, and damned if you don't.