Does a Consent Judgment Affect Credit?

Consent judgments represent a legal agreement between parties in a dispute, approved by a court. These judgments can influence an individual’s financial standing, particularly concerning credit. This article clarifies what consent judgments are and how they may relate to an individual’s credit report and score.

Understanding Consent Judgments

A consent judgment is a formal court order that results from parties agreeing to a settlement in a legal case. Instead of a full trial, the agreement is submitted to a judge for approval. Once a judge reviews and enters the agreement, it becomes a legally binding and enforceable court order, allowing for dispute resolution outside of a contested trial.

Consent judgments often arise in debt collection lawsuits, where a debtor and creditor agree on repayment terms. They can also stem from other civil matters, such as personal injury claims or contract disputes. The agreement outlines each party’s responsibilities, and the judge’s approval transforms it into a public court record, providing legal enforceability. Failure to adhere to the terms allows the other party to take further legal action.

Consent Judgments on Credit Reports

Historically, consent judgments were public records that typically appeared on credit reports under a “public records” section. Credit reporting agencies like Experian, Equifax, and TransUnion collected this information from court records nationwide. These records detailed the judgment amount, filing date, and issuing court.

However, significant changes occurred in 2017 and 2018 under the National Consumer Assistance Plan (NCAP). The major credit bureaus agreed to stop including civil judgments and tax liens on consumer credit reports. While consent judgments remain public records accessible through court databases, they are generally no longer displayed on credit reports maintained by the three primary credit bureaus. This change aimed to enhance the accuracy and relevance of credit reporting data.

Impact on Credit Scores

Due to changes implemented by the National Consumer Assistance Plan, consent judgments generally do not directly impact credit scores because they are no longer included on credit reports. Credit scoring models, such as FICO and VantageScore, primarily use information present on a credit report to calculate a score. Since judgments are typically absent from these reports, they do not factor into score calculation.

Despite this, the underlying financial issues that led to a consent judgment, such as late payments or accounts sent to collections, can still negatively affect a credit score. These derogatory marks remain on credit reports and are considered by scoring models. Lenders may also access public records directly, outside of the credit report, which could influence their lending decisions. A consent judgment signals an unresolved financial obligation, which lenders may view negatively, potentially affecting an individual’s ability to secure new credit or favorable interest rates.

Reporting Duration

Even though civil judgments are largely excluded from consumer credit reports, understanding their typical reporting duration remains relevant for other public record items. Historically, civil judgments, including consent judgments, would remain on a credit report for approximately seven years from the date they were filed. This duration applied regardless of whether the judgment had been paid or satisfied.

The Fair Credit Reporting Act (FCRA) generally dictates that most negative information, including public records like judgments, can be reported for up to seven years. While a paid judgment might be marked as “satisfied” in court records, its presence would still typically last for the full seven-year period. This timeframe reflects the period during which such financial events are considered relevant to an individual’s creditworthiness.