How a Judgment Can Impact Your Credit Score

While a court judgment itself no longer appears on your credit report, the unpaid debt that led to it can still significantly harm your score. Here’s how the situation typically unfolds.

1. Initial Delinquency: The process starts with missed payments on a debt. The original creditor reports these delinquencies to the credit bureaus, causing an initial drop in your credit score.
2. Charge-Off or Collections: After several months of non-payment, the creditor may "charge off" the debt as a loss. It might then be sold to a collection agency, which creates a new, damaging collections account on your credit report.
3. The Lawsuit: To legally compel you to pay, the creditor or collection agency can file a lawsuit. If they win, the court issues a judgment, which is a public record and a legal order for you to pay the debt.
4. Lingering Credit Damage: Even though the judgment isn't reported, the charge-off and collection account that prompted it remain on your credit report for up to seven years, continuing to suppress your score.
5. Enforcement and Resolution: The judgment gives the creditor powerful tools to collect, such as wage garnishment or bank levies. Paying the debt results in a "satisfied judgment," but the negative mark on your credit history remains until it ages off.

How Much Will a Judgment Affect Your Credit Score?

The exact impact of a judgment on your credit score can vary. Several key factors determine the severity of the drop.

• Your Existing Credit Profile: Your score before the judgment matters significantly. A high score will likely see a more substantial drop than a score that is already low or has other negative marks.
• Credit Scoring Model: Different credit scoring models weigh information differently. Newer versions like FICO 9 and VantageScore 3.0 and 4.0 no longer factor in paid civil judgments, offering some relief.
• Unpaid Judgments: Unpaid judgments will have a more severe and lasting impact. They remain on your report for seven years, continuously suppressing your score until they are satisfied and removed.

How You Can Avoid a Judgment Affecting Your Credit Score

Settle the Debt

The most direct method is to pay the amount owed. Settling the debt after a lawsuit is filed but before a judgment is rendered will typically lead to the case being dismissed. This prevents a judgment from ever appearing on your public record and affecting your credit.

File to Vacate the Judgment

If a default judgment was entered against you, perhaps due to improper notification, you can file a motion to vacate. If the court grants your motion, the judgment is voided. This effectively erases it from the record, protecting your credit score from its impact.

Ways to Improve Your Credit Score

Improving your credit score is not only possible, but it's also a critical step toward better financial health. An expert guide outlines several proven methods you can use to boost your score, with most people seeing meaningful changes within three to six months of consistent effort.

• Monitor your credit reports. Regularly check your reports from all three major bureaus to identify and dispute inaccuracies, detect identity theft, and track your progress.
• Establish automatic bill payments. Set up automatic payments and reminders to ensure you never miss a due date, as payment history is the single most important factor in your credit score.
• Reduce your credit utilization. Aim to keep your credit utilization ratio—the amount of credit you're using compared to your total limit—below 30%.
• Become an authorized user. You can be added to someone else's credit card account with a strong payment history and low utilization to help build your own credit profile.
• Diversify your credit mix. Lenders like to see that you can manage different types of credit, so having a mix of revolving credit (like credit cards) and installment loans can be beneficial.
• Limit hard inquiries. Avoid applying for too many new credit accounts in a short period, as each application can trigger a hard inquiry that temporarily lowers your score.

The Bottom Line

While a civil judgment won't appear on your credit report or directly impact your score, the original debt that led to the lawsuit can still negatively affect your credit history.

Frequently Asked Questions

How long does a judgment stay on your credit report?

Civil judgments no longer appear on credit reports from major bureaus like Equifax, Experian, and TransUnion. However, the debt is still legally owed and publicly recorded.

Can I get a loan with a judgment against me?

It is more difficult. Lenders check public records and will likely see the judgment, often requiring you to pay it off before they will approve a new loan.

Does paying a judgment remove it from public records?

No, paying the debt results in a "satisfaction of judgment." This updates the public record to show it's paid, but it does not erase the original filing.