Does a Bank Judgment Affect My Credit?

Judgments are powerful legal instruments that give banks and other creditors the means to collect a debt. A bank judgment will negatively affect your credit score for an extended period . The repercussions of enforcing a judgment can also affect your credit, effectively adding insult to injury.

What is a Bank Judgment?

A judgment is a court ruling that provides a creditor with the legal recourse necessary to force collection of a delinquent account. Types of bank judgments include those relating to defaulted revolving credit accounts or to the unpaid account balance on a mortgage loan after a foreclosure sale. Judgments issued against consumers based on credit accounts may be summary judgments or default judgments. The bank is awarded a summary judgment based on evidence, but a default judgment is awarded when the defendant neglects to appear in court. A deficiency judgment is awarded when the bank or mortgage lender sues the foreclosed homeowner for the portion of the mortgage balance that was not covered in the foreclosure sale.

Judgments and Credit

A judgment is listed in the public information section of your credit report. Not only will the presence of a judgment negatively affect your credit score, the events that led up to the judgment affect your score. Before a bank or other creditor sues a consumer for an unpaid debt, the debt is often at least six months past due. During that time, the bank has the right to report the account as past due, delinquent or a charge-off, depending on the circumstances. All of these entries have a negative impact on your credit rating.

Judgment Time Frames

Judgments negatively affect your credit report for a minimum of seven years. The statute of limitations for a judgment's validity is based on state law. Some judgments may remain in effect for 20 years. As long as the judgment is valid in your state, it will remain a visible part of your credit report. Judgments also accrue interest annually as allowed by state law.

Other Impacts of a Judgment

In addition to negatively affecting your credit, banks with judgments against you may enforce collection by garnishing your wages, attaching a lien to your property, seizing non-exempt personal property and levying your bank accounts. Garnished wages and emptied bank accounts may also affect your credit because of unpaid bills. If the creditors report the late payments to the credit bureaus, the entries will negatively affect the payment history calculation of your credit score.