Does a Satisfied Judgment Hurt My Credit?

Lawsuit judgments are a matter of public record. Credit bureaus regularly search court records and list judgments on credit reports. While a judgment can do serious damage to your credit report, a satisfied judgment is a significant improvement over an unpaid one.

Court Judgments

When a plaintiff wins a lawsuit, she receives a judgment against the defendant. The judgment is a debt that the defendant is obligated to pay, and the plaintiff to the lawsuit can collect the judgment from the defendant in several different ways. If the defendant does not pay the debt immediately, or does not agree to a payment plan or settlement, the judgment creditor can seize the defendant's assets, take out a lien on his property, and in most states, garnish his wages.

Statute of Limitations on Judgments

A statute of limitations on judgments is the legally prescribed amount of time that a judgment creditor has to collect her judgment from the defendant. Once the statute of limitations on the judgment passes, the creditor can no longer use the courts to force the defendant to give up assets to pay the debt. The statute of limitations on judgment collection varies by state, though it is typically longer than the statute of limitations on other types of debt. In some places, a judgment creditor can ask the court to renew the statute of limitations.

Credit Reporting

Because judgments are a matter of court record, they can be included in your credit report. Federal law requires credit bureaus to take a paid judgment off your report when seven years has passed since the date it was entered into the court record. Credit bureaus can report an unpaid judgment until the statute of limitations runs out.

Potential Creditors

Even if you maintain a good credit record after a court orders a judgment against you, potential creditors -- such as mortgage companies -- may want you to pay off judgments before lending you money. If you cannot pay off a judgment all at once, your judgment creditor may be willing to settle your judgment for less than what you owe. After paying or settling a judgment, you should check your credit report to see that the judgment creditor has updated the status of your judgment to "paid."