Is My Credit Ruined By a Money Judgment?

Your credit rating results from the interplay of many factors, all of which are related to your credit use and money management. Some actions have a mild negative effect, like an occasional late payment, while things like bankruptcy make it very hard to get loans, cell phone contracts, utility service or new credit cards. A money judgment also deals a bad blow to your credit.

Definition

A money judgment results from a creditor's lawsuit when you do not pay a bill. Judgments stem from things like bad checks, unpaid loans or credit cards. You can even be sued after a car is repossessed if the finance company does not recover the entire loan balance when it sells the vehicle. The court orders you to repay the money, and the judgment becomes part of public records. The Experian, TransUnion and Equifax credit bureaus routinely add information from those records to their files.

Effect

A money judgment falls into the "payment history" category. It greatly impacts your borrowing ability because items in that category account for 35 percent of your overall credit score. Creditors see the judgment date, amount and payment status on your credit reports. They may reject your credit applications, especially if you have other problems like many late payments or a high debt load because you appear less likely to fulfill financial obligations.

Reporting Time

A judgment can legally stay on your credit reports for seven years. The time frame starts from the original judgment date. Lenders see it the whole time, but they generally do not give it as much weight after the first two or three years if your recent credit history is very good. Concentrate on making on-time payments on all your other accounts after a judgment, and keep your credit card balances low. These two actions help raise your credit score.

Considerations

A satisfied money judgment looks better on your credit reports than one that is ignored, but lenders still see it as bad when evaluating your credit applications. Make sure the creditor notifies the credit bureaus when you make your payment. Check your reports a month or two after you send your money. Dispute the judgment entry with Experian, TransUnion and Equifax if they are still listing it as unpaid.