What Does a Docketed Judgment Do to a Credit Rating?

Prospective lenders and creditors use your credit rating as a risk assessment tool when deciding whether to do business with you and how much interest to charge you on financial transactions. If a previous lender sued you and holds a civil judgment against you as a result, your credit rating suffers and future lenders may determine you too risky to work with.

Docketed Judgments

As soon as the judge hands down a decision in favor of the creditor, a court judgment exists against you. The judgment does not, however, appear on your credit report immediately. The creditor must file the judgment with the court clerk before the court's decision becomes docketed and added to the county public record.

If the creditor has yet to docket your judgment, paying the debt you owe in full could prevent the legal decision from ever appearing on your credit report. Each county has its own set of rules that govern this process. Once a judgment is docketed, however, the credit bureaus will pull it from the public records database and add it to your credit files.

Credit Damage

Judgments are always derogatory, but the degree to which a docketed judgment hurts your credit depends upon your current credit report. There is no hard and fast rule dictating how many points you will lose after a judgment appears on your report. This depends entirely on your current credit score. In general, the better your credit is prior to the judgment, the more points you stand to lose afterward.

Time Frame

A docketed judgment remains a derogatory entry for the full period of time it appears within your credit history. Unlike most credit entries, however, the length of time a judgment appears on your credit file before being removed varies by state. According to the Fair Credit Reporting Act, if your state's enforcement period -- the amount of time a creditor has to enforce a judgment in your state -- exceeds seven years, the judgment remains on your credit report for the duration of the enforcement period. If the enforcement period is less than seven years, the judgment remains for seven years before being deleted.

Considerations

A judgment has the greatest negative impact when it's initially inserted into your credit file. As time passes, the judgment influences your scores less and less before finally aging off your credit report entirely. This is because recent items influence your credit rating to a greater degree than older entries. Once the credit bureaus delete the judgment from your credit files it will no longer impact your credit scores at all.