CCJ: Three letters you never want on your credit report
By Emma Lunn
If you discover someone is planning to take you to court to recover money you owe, it's important to take action quickly. If you don't, you could end up with a county court judgment (CCJ) on your credit file.
A CCJ is a black mark on your credit that can prevent you from getting a loan, a credit card or even a flat. Here's what to know about this legal measure -- and how to keep it off your credit report.
is a CCJ? And what are the consequences of having one?
A CCJ is a type of court order that may be registered against you in England and Wales if you fail to repay money you owe. To get a CCJ, your creditor must approach the county courts and ask a judge to determine how much you can afford to pay back and how long you have to pay it back.
Once a CCJ has been issued, you'll face steep consequences for missing debt payments. Your wages may be garnished, for example. If you're a homeowner, the creditor can ask for a Charging Order to be secured on it -- meaning your home is at risk of repossession if you don't keep up repayments. Or, a bailiff may visit your home and confiscate some of your property to pay for the debt.
What's more, your credit rating will suffer, as CCJs can remain on your credit record for as long as a bankruptcy can -- unless you pay off the debt within 30 days of receiving a CCJ.
"A CCJ will affect your credit record, which in turn can seriously affect your ability to get a mortgage, a credit card or even a bank account in the future," says Nancy Baynes of the Money Advice Service. "Unless you pay off a CCJ in full within 30 days of receiving the judgment, it will remain on your credit record at the Register of Judgments, Orders and Fines for six years."
How to respond to a CCJ
Despite the severity of CCJs, you still have the power to keep them off your record if you respond quickly.
When it comes to credit card and other debts, a lender will take you to court only if it has exhausted all other options. The creditor should warn you before it initiates a claim and let you know that, unless you repay the money before a certain date, it will start legal action. For credit agreements regulated under Consumer Credit Act -- which includes credit card debt -- you must be sent a "default notice" at least 14 days before any action is taken. This will tell you how you can remedy the default and what action may be taken if you don't.
When you receive a default notice, it's important to take action, whether that means repaying the debt (if you can), negotiating with the creditor or seeking professional debt advice.
If you don't pay, the next thing that will happen is that you'll be issued with a county court claim (previously known as a "summons") by the court.
You don't have to show up at court, but you must respond in writing within 14 days by filling out the paperwork that comes with the claim. You'll need to complete a claim form detailing all your income and outgoings so the court knows how much money you might have available to pay the debt.
At this stage, you can either make an offer of payment or file a defence if you disagree with the amount owed. The reply form the court sends you will include details of how to file a defence.
If you make an offer of payment and it's accepted, you'll receive a CCJ detailing the payments you need to make. If the offer is not accepted (or if you don't make an offer), you'll be issued with a CCJ to pay an amount decided by the court.
Once you have the CCJ, a 30-day clock starts ticking. If you pay the debt in full within 30 days, you can have the CCJ wiped from Register of Judgments, Orders and Fines -- meaning it will not show up on your credit report. If you don't, it will remain on the register for six years -- and be visible to lenders.
Once a CCJ is on your credit record, there is little you can do to remove it unless it was issued incorrectly -- for example, if the claim was sent to the wrong address. So the best advice is to not let your debt situation escalate this far to begin with.
Published: 7 November 2012
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