Court judgements in Australia typically remain on a credit report for five years, sometimes even after a borrower has paid off the debt.
To remove a paid judgement from a credit report, you should first ask the credit provider to confirm in writing that you have paid off the money owed. If that is not enough to strike off the judgement, you may need to seek a signed consent order from the creditor or apply to the courts to have it set aside.
What is a credit report, and what does it include?
Credit reports for consumers and businesses contain credit history information (repayments on bills, loan applications etc.) that informs lenders and creditors of their borrowing risk. Lenders will access your credit file with one of the reporting bureaus or agencies, via a hard enquiry, before deciding to proceed with your application. This information is then kept on file, and it can be hard to remove inquiries from the credit report.
As an individual consumer, this information includes name, date of birth, address history and employment. Three main bureaus hold credit files for consumers in Australia: illion, Experian and Equifax (formerly Veda). Your credit report will detail your creditworthiness per that reporting body, which may change according to factors such as:
- Have you previously paid debts on time and in full?
- Have you been bankrupt or held a Directorship of an insolvent company?
- How frequently have lenders conducted hard inquiries on your credit file?
- Are there any court judgements or notices against you?
What is a judgement, and why is it on a credit report?
In Australia, a creditor can sue a borrower if a debt remains unpaid. If the borrower loses – there is an official court judgement against them. Credit reporting agencies and bureaus consider this information worth recording on file because it reflects poor repayment behaviour.
This detail may influence other lenders to reject you as a borrower, as there is such strong evidence of negative payment behaviour in the past. You may, therefore, seek to fix your credit score, especially if you had a bad credit rating last time you checked.
What does it mean to have paid a judgement?
To have ‘paid a judgement’ means you have, as a borrower, settled the outstanding debt following the court action. Some credit reporting bodies may find this enough to remove the court action from your credit file if they are made aware of the payment. However, some bureaus or agencies may instead maintain the record of the court judgement, adding a note to say you have repaid the debt.
How long do judgements stay on your credit report?
According to the Office of the Australian Information Commissioner, court judgements stay on your credit file for five years unless removed. This limit does not change between states, including NSW, Victoria or SA. You may be wondering how long does bankruptcy stay on your file Australia, or when does a default get removed? The length of time events and information may stay on your credit report includes:
|Type of information||Time on credit report|
|Court Judgement||5 years|
|Bankruptcy||5 years starting on the day you became bankrupt, or 2 years starting on the day you were no longer bankrupt|
|Credit enquiry||5 years|
|Current consumer credit obligations||2 years (from the end of the consumer credit)|
|Debt agreement||5 years from the day the agreement was made
2 years from the day the agreement was:
* ends when the agreement ends under section 185N of the Bankruptcy Act, 1966
* an order was made declaring the agreement void
|Financial hardship information||1 year|
|Repayment history||2 years|
Why might you want to remove a court judgement?
You are less likely to secure approval for future loans with a court judgement on your credit file, even a paid one. That information alone may be enough to convince some lenders that you are unsuitable for their products. Therefore, if you wish to apply for further debt, it may be in your best interests to try and have the court judgement removed.
Failure to remove a court judgement may prevent a borrower from accessing loan products such as a mortgage or business loan for up to five years – limiting their potential to get ahead.
How to remove a paid judgement from credit report
Can a paid default be removed from your credit file? In certain circumstances – yes, it can.
Before following the steps below, you must ensure eligibility by confirming payment of the previously outstanding debt related to the court judgement. Failure to do so may limit your ability to remove the event from your credit file. Alternatively, you may dispute the debt to the court that issued the judgement. In these cases, you must demonstrate why you failed to mount a reasonable defence during the initial action and why there was a delay (if any) in submitting a dispute.
- Write to the creditor to confirm payment
At the very least, you must supply the reporting bureaus with written confirmation of payment from the lender/creditor that provided the loan resulting in court action. You must have this document as proof of the debt settlement before contacting the credit reporting bodies. Otherwise, they will not strike off the judgement from the file.
- Supply this information to the credit reporting bureaus
After you obtain written confirmation of full payment – contact the bureaus and provide it to them. Some reporting bodies may consider this information enough to strike the judgement off your file. For others, it may reclassify the court judgement from ‘outstanding’ to ‘paid’ but maintain the event on your credit history. That can be troubling, as even paid court judgements on file often decrease approval chances with many lenders.
- Obtain a signed consent order
You may need to obtain a signed consent order if the reporting bureau fails to strike off the court action after supplying payment confirmation. The consent order can be submitted to the court if agreed to and signed by the creditor. The order outlines consent from both parties to put aside the judgement and discontinue any further legal proceedings. The court will then consider the order and may request that the bureaus remove the court judgement from your credit file.
- Apply directly to have a court set the judgement aside
You may apply directly to the courts to have a judgement set aside if the creditor refuses to sign a consent form (which they are not obligated to do). The court will consider your application to determine if there is standing to request that the bureaus remove the judgement despite the lack of creditor consent.
Check risky trading partners and bad debtors with CreditorWatch
For businesses, it is critically important you are made aware of any court actions, ASIC notices, defaults or cross-directorships involving trading partners and debtors. Leave it to chance, and your business may be the one that winds up in court.
RiskScore, from CreditorWatch, reveals all the clear credit score details you need to make informed decisions. Incorporating court judgements, ASIC filings and more, RiskScore distils extensive business data into a simple score from 0-850 (the higher, the better). Any court notices form part of the included data, potentially reducing that business’s RiskScore and recommending more caution.
For some high-value relationships, you may require more due diligence. A full-scale analysis of company financials is available in Financial Risk Assessments from CreditorWatch. Accompanied by succinct analysis from a qualified Chartered Accountant (CA) or Certified Professional Accountant (CPA), we dive deeper into three years of income statements, cash flow statements, balance sheets, ASIC notices and more. The very viability of your business may rest on these relationships, so make sure you conduct the proper research.
With the right tools, you can protect your essential cash flow and avoid risky debtors. Speak to our expert team today.
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