Your credit score is that unassuming three-digit number calculated and shared upon request by credit bureaus to tell potential lenders how likely or unlikely you are to repay a loan. If your credit history includes a judgment, you have probably noticed it has the effect of lowering your creditworthiness. If you are wondering how long a judgment stays on your credit report and what you need to do about it, read on.
What is a Judgment on a Credit Report?
A judgment on your credit report shows a lender had to take you to court to recover the money they loaned you. Judgments let potential lenders know that loaning you money may be risky. Even after you settle with a creditor or pay them back through wage garnishment, tax return garnishment, a monthly payment plan, etc. — what is called a satisfied judgment — the judgment will still remain on your credit report. To counteract a judgment on your credit report so you can successfully receive credit services in the future, you need to focus on repairing your credit. It should also be noted that a satisfied judgment on your credit report is also better than an unsatisfied judgment (i.e. a judgment that has not been paid or settled).
The Fair Credit Reporting Act (FCRA)
To understand how long a judgment can stay on your credit report, it is necessary to know about the Fair Credit Reporting Act (FCRA). Passed in 1970, the FCRA is a federal law designed to help consumers understand the information collected and reported on by credit reporting agencies (e.g. Experian, TransUnion, and Equifax). It dictates rules around consumer debt and privacy, accuracy, and reporting. One of the rules established by the FCRA is how long bad debts like bankruptcy or other debt-related civil judgments can remain on your credit report.
So how long does bad debt like a judgment stay on your credit report?
The Length of Time a Judgment Stays on Your Credit Report
A judgment stays on your credit report for seven years, although in some cases — such as bankruptcy — the judgment can stay for as long as 10 years, and it does not matter what type of loan the judgment relates to: a car loan, a student loan, unpaid credit card debt, a personal loan, a cosigned loan, etc. Consumers who have had a judgment placed on their credit report need to ensure the judgment is removed from their credit report after the allotted time (either seven or 10 years) has passed.
Looking for more information on types of debt, debt collection, or the debt statute of limitations? Check out the Personal Finances section of TDECU’s Advice Center today.