Legal entries, like judgments, tax liens, bankruptcies and foreclosure cause significant deductions to an individuals credit score. These entries are a gigantic indicator of risk. Risk is what credit scores are all about. Try to think of the situation in an objective manner. If you were thinking about lending to someone and found out that another creditor had to sue them to recover money; do you think you'd reconsider before making the loan or possibly charge more interest to offset the perceived increase in risk? As far as credit is concerned, with any legal entry, being paid is simply a footnote. What needs to take place is for the proper DISPOSITION to be recorded. In the case of a judgment, the disposition is either a "Satisfaction of Judgment" or an "Order to Vacate Judgment" (dismissal). Call the courthouse where the judgment was recorded and ask the procedure (which varies from jurisdiction to jurisdiction) for obtaining the disposition appropriate for your case. More than likely, you will have to show proof of payment. After you obtain the disposition, be sure to take the additional step of having the new document recorded. There is usually a small fee for this, but it's well worth it. Recording this document will (hopefully) ensure that the disposition ends up on your credit report to "tie up" the legal entry in a nice bow. It's also a good idea to forward a copy directly to any credit bureau reporting the judgment, just in case. If you have a judgment and it is being paid on a monthly basis with all parties in agreement, how does this affect your credit?
When a person is taken to civil court (for example, a credit card company suing a cardholder to get paid back), the court makes a judgment for or against the plaintiff (entity initiating the lawsuit, in this example, the credit card company). If the judgment is for the plaintiff, the result is effectively a judgment against the defendant (the person taken to court in the example). Part of the judgment is the amount that is to be paid to the entity winning the court case (judgment). Judgements against a borrower (and the amount set to be paid by that borrower) will make their way onto the credit report and will cause a drop in credit score.
Seven years or until the SOL pertaining to the judgment expires. Many states have domestic judgment SOL's that are 10 or 20 years, and many judgments are renewable. The older the judgment becomes, the less affect it has on the credit score. It will may cause other problems, for example, if the consumer wants to buy or refinance a home and in some cases, a vehicle(s), the lender may require the judgment be paid before approving any loan.
A judgment will remain on your credit report until it is paid. If you have paid it, take the receipt into the court that issued the judgment and get it marked paid. It may take awhile for the credit reporting agencies to make the change, but you can send each a copy of the paid receipt and a letter which may help shorten the time. Meanwhile, keep a copy of that receipt.
A debt settlement offer has no bearing on your credit rating or score. It is only an offer, a proposal. Your credit rating is based on how you have paid the debt in the past 7-10 years. Your credit score is a numerical picture of your assessed risk as a borrower, based on the information in your file at the time the score is requested.
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