Regardless of whether or not you have a judgment, you can only borrow money if you find a creditor willing to lend. In certain situations, you may be able to borrow money if you have a judgment, but most creditors that rely on statistical models to extend credit may be reluctant. Once you have a judgment, even paying it off may not immediately improve your chances to get credit.
Judgment
One of the reasons that having a judgment makes obtaining credit difficult is that it reflects a pattern of delinquency, and not just a one-time event. A creditor cannot simply get a judgment against you because you miss a single payment. Rather, a creditor must file a lawsuit and get the court to agree that you are a delinquent debtor. Usually, a creditor will resort to filing a lawsuit only as a final option, as it takes money to get a judgment. As a result, a judgment usually reflects a sustained and continued refusal for you to pay your debt. This type of financial behavior can scare off potential lenders from letting you borrow money. Additionally, if you do have a judgment against you, it means that your creditor is most likely garnishing your wages, meaning you have fewer financial resources available to pay off any new loans. While it is theoretically possible, having a judgment against you can make it exceedingly difficult to obtain a new loan.
Credit Score
Another reason a judgment makes it more difficult for you to borrow new money is the effect it has on your credit report. A judgment is a public record that is almost on par with a bankruptcy in terms of the damage it can do to your credit score. A judgment will last on your report for seven full years, during which time your credit score will be impaired. Even if a creditor does not look at the public record section of your credit report, a request for your credit score can often be enough to deny future credit.
Satisfying A Judgment
If you pay off your judgment, you may be in a better position to obtain new credit. While your judgment will remain on your credit report even after you pay it off, the notation that you did make full payment can carry weight with your future creditors. If you can explain that the judgment was a one-time problem due to overwhelming financial pressure, you may help you borrow new money.
Additional Ramifications
In addition to being an obstacle to borrowing money, having a judgment on your credit report can also be an impediment to getting a new job. Many employers use credit checks as part of the application process. Credit report delinquencies can often prove problematic, particularly if you are applying for a job that involves handling money.
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