If you've ever missed payments and seen scary letters from creditors, you've probably heard both terms thrown around. Judgment. Charge-off. They sound equally terrifying — and they both wreck your credit. But here's the thing. They don't actually do the same kind of damage.
One hits your credit score harder. The other hits your wallet harder. And most people have no idea which is which.
So let's fix that.
What a Charge-Off Actually Means
A charge-off happens when your creditor gives up on collecting your debt. This usually kicks in after about 180 days of missed payments. They write it off as a loss on their end and move on.
But don't let that fool you. A charge-off does NOT mean the debt is gone. You still owe every single dollar. The creditor just stopped trying to collect it the normal way. They might sell it to a debt collector, come after you themselves, or even take you to court down the road.
And here's the part that catches most people off guard. That one unpaid debt can show up on your credit report twice, once as the original charge-off, and again if it gets handed off to a collections agency. Two hits. One debt.
What a Judgment Actually Means
A judgment is a court order that says you legally owe the money. A creditor has to sue you to get one, and if you don't show up or respond, they win automatically; that's called a default judgment.
Judgments are a whole different level of trouble. Once a creditor has a judgment against you, they gain real legal power. We're talking wage garnishment, bank levies, and in some states, liens on your property. They can essentially force payment without your cooperation.
So yeah. A judgment is the escalation most people never want to see.
How They Show Up on Your Credit Report
This is where things get interesting and a little confusing.
Charge-offs show up loud and clear. Your report will display the full amount owed, the date it happened, and the status. Lenders see it. It tanks your score. No way around it.
Judgments used to work the same way. But in 2017, the three major credit bureaus — Equifax, Experian, and TransUnion- pulled most civil judgments off credit reports entirely under something called the National Consumer Assistance Plan.
That doesn't mean judgments are invisible, though. Lenders can still find them through public records searches. And the missed payments and charge-offs that led to the judgment in the first place? Those are still sitting right there on your report, doing damage.
Good Read: Charge-Off Got You Down? How to Remove It Without Paying
The Credit Score Impact — By the Numbers
A single charge-off can drop your credit score anywhere from 100 to 150 points. That's not a small dip. That's the kind of drop that locks you out of good loan rates, tank apartments, and makes lenders nervous.
The newer the charge-off, the worse the damage. FICO models punish recent negative events way more than old ones. A charge-off from last month will hurt a lot more than one from four years ago.
Judgments, on the other hand, barely move the needle on your actual score anymore — at least not directly. The real scoring damage already happened through the missed payments and charge-offs that came before the lawsuit even started.
So Which One Actually Hurts More?
Here's the honest answer. It depends on what kind of "hurt" you're talking about.
Pure credit score damage? Charge-offs win. They show up on your report and get factored directly into your score. Right there. No way to hide it.
Real-world financial damage? Judgments are worse. A charge-off makes it hard to borrow money. A judgment lets your creditor take money you've already earned.
Think about it this way. A charge-off damages your reputation with lenders. A judgment damages your actual bank account.
How Long Does Each One Stick Around?
Charge-offs live on your credit report for seven years. But here's a detail most people miss — that clock starts ticking from the original date you stopped paying, not the date the creditor officially charged it off.
So if you stopped paying in March and the charge-off happened in September, that seven-year countdown started back in March.
Judgments don't have the same credit report timeline anymore since they've been mostly removed. But legally? They can stick around for 5 to 20 years, depending on your state. Some states even let creditors renew them. That's a long time for a creditor to have legal power over your finances.
What Happens When You Try to Borrow Again?
After a charge-off, getting approved for new credit is tough but doable. Secured credit cards and credit-builder loans are the most common ways people start climbing back. The further you get from that charge-off date, the less it weighs on your applications.
An active judgment is a different story. Even if it doesn't show up on your credit report, mortgage lenders specifically ask about judgments on their applications. And lying on a loan application is fraud — full stop. Many lenders also run their own public records searches during underwriting.
If you have an active judgment and you're trying to get a mortgage or any major financing, resolve that judgment first. It's not optional.
Related Read: I Paid a Charge Off: Will My Credit Score Increase?
How to Deal With a Charge-Off
Paying off a charge-off doesn't erase it from your report. It stays there. But the status changes to "paid" or "settled," and lenders look at that a lot more favorably than an unpaid one.
You can often negotiate a settlement for less than the full amount. Just be aware that any amount the creditor forgives might get reported as taxable income.
If your charge-off has errors like wrong amounts, wrong dates, or an account that isn't even yours, you have the right to dispute it. File a dispute with the credit bureau under the Fair Credit Reporting Act, and they have to investigate within 30 days.
How to Deal With a Judgment
If you get served with a lawsuit, respond. Even if you can't pay a dime, responding keeps your options open. Ignoring it guarantees a default judgment against you.
Once a judgment is already in place, your main options are paying it in full and getting it marked as satisfied, negotiating a settlement for less, or, in some cases, discharging it through bankruptcy.
And if wage garnishment kicks in, federal law caps it at 25% of your disposable income or the amount above 30 times the federal minimum wage, whichever is less. Certain income, like Social Security and unemployment benefits, can't be garnished at all.
How to Rebuild After Either One
Whether you're dealing with a charge-off or a judgment, the recovery playbook looks the same.
Start by pulling your free credit reports from annualcreditreport.com. Know exactly what's on there. Dispute anything that's wrong. Then focus on paying down what you currently owe before adding any new debt to the mix.
From there, it's about building positive habits. On-time payments. Low credit utilization. Responsible credit management. Most people start seeing real score improvement within 12 to 24 months of staying consistent.
It's not overnight. But it works.
The Bottom Line
Charge-offs and judgments both hurt, but in very different ways. A charge-off is the bigger direct hit to your credit score. A judgment is the bigger threat to your actual money.
Neither one is permanent. Charge-offs fall off after seven years. Judgments can be resolved, satisfied, or discharged. And consistent, responsible financial behavior will gradually push both of them further into the rearview mirror.
If you're dealing with either right now, the best move is to stop guessing and start getting informed. Pull your credit reports. Understand exactly what you're up against. And if the situation feels overwhelming, a nonprofit credit counseling agency can help you build a real plan — no fees, no gimmicks, just straight guidance.
Knowledge is the sharpest tool you have here. Use it.
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