A judgment occurs when the court orders the defendant to pay the plaintiff a certain sum of money. Once a judgment is entered, that information appears on the defendant's credit report and impacts the credit score.
History
The Fair Isaac corporation created the FICO scoring model in 1989 in partnership with Equifax. Back then, it was called BEACON, a trademark of Equifax. It is the score used most by lenders, according to Fair Isaac.
Significance
Lenders use credit scores to help ascertain approvals or denials on loans. They also use them to decide what interest rate a consumer will pay on that loan. Higher scores usually receive more favorable rates.
Effects
According to FICO, how well you pay your bills accounts for 30 percent of your score. A judgment is an adverse public record, and it indicates a failure to honor a loan agreement and thus, it will lower your score. How much it drops depends on the other information contained within the report.
Misconceptions
Once a judgment is on your credit report, it will remain there for seven years. Even if you later pay the bill, it will not remove it from the report. Credit bureaus can report negative information as long as it's accurate. The older the judgment becomes, however, the less it will affect your overall score.
Warning
Never pay anyone to repair your credit or remove accurate items. You can fix errors yourself. The Fair Credit Reporting Act (FCRA) gives you the right to dispute inaccurate information on your report. Bureaus then have 30 days to investigate and make corrections.
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