How to Qualify for an Unsecured Loan With a Judgment

It is possible to qualify for an unsecured loan with a judgment on your credit report. It depends on the lender's credit guidelines and the type of loan you are seeking. For example, certain secured loans, such as payday loans, do not require a credit check. The Federal Trade Commission strongly advises against payday loans, but they are popular with people who cannot qualify for standard financing.

Legal Action

A judgment is a legal decision reached by a judge. She issues a judgment after hearing a lawsuit and agreeing that you failed to pay a debt or you should pay financial damages because of a civil dispute. The judgment orders you to pay a person or firm a specific amount of money. Judgments are listed on credit reports for seven years and are considered negative credit events. Some lenders refuse to lend to people with unpaid judgments on their reports, regardless of their credit score.

No Collateral

Unsecured loans are risky for creditors because the loans aren't backed by collateral. The judgment labels you as a credit risk, prompting some lenders to fear you will simply walk away from a new unsecured loan if you develop financial problems and cannot pay. Judgments often eliminate consideration from banks and credit unions, forcing you to apply elsewhere for unsecured loans at exorbitant interest rates.

Credit Repair

Judgments cannot be removed from your credit report unless the information is inaccurate or has been listed on your report for more than seven years. Major credit bureaus Experian, TransUnion and Equifax regularly review court proceedings to gather the information. Paying the judgment results in your credit report being updated to show the the listing as a "paid judgment." Paying the judgment increases your chances of eventually being approved for unsecured loans at reasonable interest rates. A paid judgment shows creditors you are trying to repair credit mistakes.

Secured Credit

You may be better off without credit if you are forced to borrow money at high interest rates. Instead, create a plan for earning extra money and paying off the judgment. Pay all your other bills on time while paying down debt as well. Eventually the paid judgment will have less of an impact on your credit score and you may qualify for unsecured loans at reasonable rates.