What Is a Civil Judgement on a Credit Report?
Uncover what a civil judgment on your credit report signifies, its financial implications, and the steps you can take to manage its presence.
Civil judgments represent formal court decisions that can significantly influence an individual’s financial standing. These legal rulings, often related to unpaid debts, become part of public records. When such a judgment appears on a credit report, it signals a serious financial obligation to potential lenders and creditors. This article clarifies what civil judgments are, how they are reported, their implications for creditworthiness, and the steps individuals can take to address them.
Understanding Civil Judgments and Their Reporting
A civil judgment is a formal court order determining that one party, the debtor, legally owes money or must perform a specific action for another party, the creditor. This differs from a criminal judgment, which involves legal penalties for breaking laws. Common situations leading to a civil judgment include unpaid credit card balances, outstanding loan defaults, medical bills sent to collections, or rulings from small claims court.
These judgments originate from public court records. While major credit reporting agencies like Equifax, Experian, and TransUnion adjusted their practices in 2017 regarding the direct reporting of certain public records, civil judgments can still appear on credit reports. This occurs when creditors or collection agencies furnish information about the judgment to the bureaus, or when data furnishers access public records and report them.
A civil judgment is distinct from a standard delinquent account reported by a creditor, as it carries the weight of a court-ordered obligation. It signifies a legal finding that a debt is owed, making it a more severe financial indicator. Information about the judgment, including the amount owed and the court date, appears on a credit report.
Impact on Your Credit Score
Civil judgments are detrimental marks on a credit report, often more damaging than late payments or collection accounts due to their legal backing. Their presence indicates a severe financial obligation that required court intervention, making them a significant red flag for lenders and financial institutions.
Major credit scoring models, such as FICO and VantageScore, penalize the presence of civil judgments. An immediate and substantial drop in credit scores is typical when a judgment appears. The exact impact varies based on an individual’s credit history, but it can be hundreds of points.
Civil judgments remain on a credit report for seven years from the date they are filed, even if paid in full. The seven-year period is a common standard for credit reporting, though some state laws may vary. This extended presence can severely limit financial opportunities.
The presence of a judgment on a credit report can affect approval for various financial products, including mortgages, auto loans, and credit cards. Landlords may also review credit reports, potentially impacting rental applications. Certain employment opportunities, especially those requiring financial responsibility or security clearances, can be negatively affected by an outstanding civil judgment.
Addressing Civil Judgments on Your Credit Report
The first step in addressing a civil judgment on your credit report is to obtain copies of your credit reports from all three major credit reporting agencies: Equifax, Experian, and TransUnion. Review each report to verify the judgment’s accuracy, including the amount, filing date, and parties involved. Confirming that the judgment belongs to you is also an important verification step.
If the civil judgment is accurate and you acknowledge the debt, the most direct way to mitigate its impact is to pay it off. After settling the debt, it is important to obtain a “Satisfaction of Judgment” document from the court where the judgment was filed. This official document serves as legal proof that the judgment has been satisfied.
Once you have the Satisfaction of Judgment, submit a copy to each of the three credit reporting agencies. While the judgment may remain on your credit report for the standard seven-year period, its status will update from “unpaid” to “paid” or “satisfied.” An updated status, though still a negative mark, is generally viewed more favorably by lenders than an outstanding, unpaid judgment.
If the judgment on your credit report is inaccurate or unrecognized, you have the right to dispute it with the credit reporting agencies. Initiate a dispute with each bureau reporting the inaccurate information, providing a clear explanation of why you believe the judgment is incorrect. Include any supporting documentation, such as proof of identity or evidence that the debt is not yours. The credit bureaus are obligated to investigate your dispute, typically within 30 days, and will notify you of their findings.