Judgments may have a worse effect on your credit score than collections. Since judgments may be reported much longer than collections, depending on which state you reside in, they may wreak havoc on your credit score for many years. Judgments appear in the "public records" section of your credit report, which is different than the section that contains collections. Also, in much the same way as a collection, once a judgment is reported on your credit report, it will still show as "paid" even after you pay it off. Many states also allow judgments to accrue interest, so don't assume that the amount shown on your credit report is the actual total amount due. It's never a good idea to ignore judgments for this very reason. Some states allow for double digit interest and additional fees to accrue, so the balance of a judgment could easily double or triple in a few years time. Don't let judgments go a very long time without addressing them.

Judgments are typically the result of creditors pursuing legal action against consumers who failed to pay various debts. Some credit card companies may pursue legal action once an account goes to collection, but usually only if the amount is worth them hiring an attorney and filing a lawsuit. Once a lawsuit is filed, the debtor must be legally served and a court date is set once this occurs. And if the debtor can't be located, the creditor may file papers to circumvent the serving process. In either case, the creditor will most likely be awarded a default judgment if they do not show up to court.

Many judgments can be settled for less than the full amount by either negotiating with the creditor for a release of judgment or seeking the help of an attorney that specializes in credit litigation. Many attorneys may offer to work with a creditor who has obtained a judgment for a small fee of a few hundred dollars or even less. Once a settlement is reached, make sure to get a release of judgment to prove that it's been paid or settled and send this to the credit bureaus so your credit rating can improve.

Since credit scores are determined by an algorithm, it's impossible to know exactly what effect a judgment will have on the score. But one thing is for sure: a judgment does not help your credit rating. If you suspect a creditor may have been awarded a judgment against you, obtain a free credit report today and make arrangements to either pay or settle the judgment as soon as possible.