How many points on your credit score is paying off a judgment worth?

Paying off a Judgment

Settling judgments will have only a slight effect (if any) on your credit score. What it WILL effect is your ability to attain further credit - you may be denied credit due to an outstanding judgment or tax lien, regardless of what your FICO score is.

Paying off collections, especially older collections, will drop your FICO score initially. In the long term, of course, your score will be much better off, and some collection companies may even delete their trade line all together once payment is received, but do not count on this. If you need points in a hurry (applying for a home/car loan), do NOT start paying collections off. You will be doing yourself a grave disservice. Wait until the deal is done and pay these off either at closing or after the transaction is completed.

Finally, one recent 30 day late will drop a FICO score by approx. 50 points - a considerable sum, regardless of account type. Most people make the common mistake of refinancing their mortgage and skipping their last payment, thinking the deal will be done before anyone will notice the delinquency and saving themselves a mortgage payment. THIS IS A MISTAKE! I have seen many people lose their approvals (and thus their loans) because of this, and the results are quite devastating.

More Information:

  • PAYING a judgment will have no impact on your credit score. Getting the legal disposition (in this case a satisfaction), having that recorded, and informing the credit bureaus of this CAN impact your score, but only marginally, per the previous answer to this question. Exact scoring models are a closely guarded trade secret. Information about scores is mainly empirical and comes from trial and error. The reason that paying off collection accounts or getting the disposition to a legal item recorded and properly notated on your credit report affects your score so slightly is that 35% of your score is calculated from recent activity, such as late payments, payments on collection accounts (even payment in full), etc. This is why paying off derogatory items right before a purchase might not impact your scores in the way you anticipate. If possible, pay off or settle those collections and charge offs now, get dispositions recorded for any outstanding legal items, pay all accounts in a timely this for a full year, and THEN you will see significant improvement in your credit score.