Does a Paid Judgement Affect Your Credit?
Learn how civil judgments, even after payment, affect your credit score and how to manage their presence on your report.
A civil judgment is a court order to pay a debt, arising from a lawsuit where a creditor seeks to recover unpaid money. While the underlying debt might have already impacted your financial standing, the judgment itself is a formal legal pronouncement. This legal decision can have lasting implications, even if the debt is eventually settled. Understanding how these judgments interact with credit reporting is important for anyone navigating their financial health.
How Judgments Appear on Credit Reports
A civil judgment represents a court’s decision that you owe money to another party. Historically, these public records, including tax liens, were displayed on credit reports by major credit bureaus. This indicated a consumer’s financial obligations to potential lenders.
However, significant changes occurred starting in 2017 with the National Consumer Assistance Plan. Equifax, Experian, and TransUnion began to remove most civil judgments from consumer credit reports. This change was largely due to accuracy issues, as many public records lacked sufficient identifying information, leading to potential misattributions. Judgments remain public records, accessible through court databases or specialized reporting agencies, and lenders may still access this information outside of standard credit reports.
Impact of Paid vs. Unpaid Judgments on Your Credit Score
A civil judgment signals increased risk to potential lenders. While major credit bureaus no longer typically include civil judgments on credit reports, the underlying financial behaviors that led to the judgment, such as late payments or collection accounts, are still reported. These negative marks significantly lower credit scores and can remain on a credit report for up to seven years.
If a judgment is entered against you, it indicates to lenders that a court has validated an outstanding debt. Lenders can discover this through public record searches. An unpaid judgment can lead to further collection actions like wage garnishment or property liens, which can severely impact your financial stability and ability to secure new credit.
A paid judgment, also known as a “satisfied” judgment, demonstrates the debt has been resolved. Paying the judgment does not erase the event from public record or the negative impact of the underlying debt on your credit history. However, it shows a commitment to fulfilling financial obligations and can be viewed more favorably by some lenders, as it indicates the debt is no longer active and poses less risk than an outstanding, unpaid judgment. The age of the judgment and the original amount also influence its impact; older judgments generally have a diminishing effect, and smaller amounts may be less concerning than larger ones.
How Long Judgments Remain on Credit Reports
The Fair Credit Reporting Act (FCRA) dictates how long negative information can remain on a credit report. Historically, civil judgments could remain on a credit report for up to seven years from the filing date. This seven-year period applied even if the judgment was paid sooner, as the “paid” status merely updated the entry rather than removing it entirely.
The negative influence of a judgment on a credit score tends to lessen over time. The initial impact of the judgment, along with any associated delinquencies or collections, persists for the full reporting period. This means that even after payment, the financial event and its associated negative credit history can continue to affect creditworthiness for several years.
Verifying and Updating Judgment Status on Your Credit Report
Ensuring your credit report accurately reflects the status of any past judgments is important for managing your financial profile. You can obtain free copies of your credit reports from Equifax, Experian, and TransUnion to review their contents. While civil judgments are generally excluded, it is prudent to check for any inaccuracies or public record entries that might still be present.
If you find an incorrect judgment entry or one not marked as paid, you have the right to dispute this information with the credit bureau. The dispute process involves submitting a written claim along with supporting documentation, such as a satisfaction of judgment document, canceled checks, or official payment records. Credit bureaus are generally required to investigate disputes within 30 days.
It is beneficial to obtain an official “satisfaction of judgment” document from the court where the judgment was filed. This legal document formally certifies that the debt has been fully satisfied. While this document does not remove the judgment from public records, it serves as proof of payment that can be provided to credit bureaus or potential lenders, demonstrating that the obligation has been fulfilled.