A court judgment is bad news for your credit report. It's a judge's ruling that you failed to pay money you owed someone, and that's going to hurt your credit score. Paying the judgment, the Experian credit bureau says, can reduce the damage, but it won't erase it. Only time can completely heal your credit score.
Why Judgments Hurt
Most court cases don't go on your credit report, but any case involving bad debt does. The Fair Isaac Corporation, the credit-scoring company behind the FICO score, says there's no one number for measuring how much your credit score falls with a judgment. Instead, it depends on the rest of your credit history. One bad item will matter less if you've paid all your other debts than if you have a long string of unpaid bills. Likewise, the benefit of paying a judgment will vary unpredictably from person to person.
The Effect of Time
Federal law says that after seven years court judgments and most other negative notations must come off your credit report. Some states allow for faster removal -- in New York, judgments disappear after five years, for instance. Paying the judgment won't remove it from your file any faster, and credit-improvement services can't make it disappear. The more time passes, however, the less impact the judgment will have, particularly if your debt-payment record since then has been sound.
Watching Your Report
Don't assume that once you've paid the judgment, the bureaus will record this. The Consumers Union, the policy arm of "Consumer Reports," says as many as 25 percent of credit reports contain errors, so it's important to review what yours says. You can get one free report a year from each of the major credit bureaus -- Equifax, Transunion and Experian -- through the Annual Credit Report website. If you settled the judgment, your report should say so. If the judgment's a decade old, though, it shouldn't be on the report at all.
If the credit report on your judgment is wrong or outdated, contact the bureau in writing. Identify the error and ask that the bureau fix it. Include copies of any supporting documents, such as court records or a letter from your creditor. The bureau must investigate your complaint within 45 days and correct the error. If the bureau refuses to change anything -- Consumers Union says this often happens -- you may need to talk to a lawyer.
- Equifax: How Can Public Records Affect My Credit Score?
- Experian: Satisfaction of Judgment Will Not Cause the Public Record to be Deleted
- Experian: Small Claims Judgments Are Reported to Credit Bureaus
- MyFICO: What's in my FICO Score
- MyFICO: Length of Time Negative Information Remains on Equifax Reports
- MyFICO: How to Repair My Credit and Improve My FICO Score
- Consumerist: How Not to Suck at Disputing Credit Errors
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