Does Wage Garnishment Affect Your Credit Score?

Your wages have been garnished. You’re worried about your credit score.

Good news: wage garnishment doesn’t directly appear on your credit report. Credit bureaus stopped including civil judgments in 2017.

However, the debt behind the garnishment has already damaged your credit. The garnishment itself won’t make things worse, but it signals deeper financial trouble to future lenders.

You need to understand how garnishment works and what you can do to protect yourself.

What Is Wage Garnishment?

Wage garnishment happens when a court orders your employer to withhold money from your paycheck. The withheld funds go directly to a creditor or debt collector.

Creditors must sue you and win before they can garnish your wages. They can’t just start taking money without a court order.

Common debts that lead to garnishment include:

• Credit card debt
• Medical bills
• Personal loans
• Student loans
• Child support

Your employer receives the garnishment notice within 5 to 30 days after the judgment. They must comply with the court order and start withholding immediately.

Federal law limits how much creditors can take. They can garnish up to 25% of your disposable earnings.

Wage Garnishment Doesn’t Appear on Credit Reports

The three major credit bureaus changed their policies in 2017. Equifax, Experian, and TransUnion no longer include civil judgments or tax liens.

Your wage garnishment judgment won’t show up on your credit report. It won’t directly lower your credit score.

But here’s the catch: garnishment doesn’t happen in a vacuum.

The debt that led to garnishment has already hurt your credit. Multiple missed payments appeared on your report months before the lawsuit.

How Unpaid Debt Damages Your Credit

Wage garnishment is the final step in a long process. Your credit takes hits at every stage.

Late Payments Hit Your Report After 30 Days

Your creditor reports any payment that’s 30 days past due. Each late payment stays on your credit report for seven years.

Payment history makes up 35% of your FICO score. Even one late payment can drop your score by 100 points.

Charge-Offs Appear When Debt Goes to Collections

Creditors typically send accounts to collections after 90 to 180 days of non-payment. They mark your account as “charged off.”

A charge-off is one of the worst marks on your credit report. It tells future lenders you failed to repay a debt.

The original creditor sells your debt to a collection agency. The collection account appears as a separate entry on your report.

Collection Accounts Create Additional Damage

Debt collectors can report your account to credit bureaus. Many do, though federal law doesn’t require it.

Collection accounts include payment information. If you miss payments to the collector, those appear too.

Each collection account remains on your credit report for seven years from the original delinquency date.

Wage Garnishment Affects Future Loan Applications

Lenders don’t see the garnishment on your credit report. But they will discover it during the application process.

Loan applications ask about your income and financial obligations. You must disclose garnishments when asked.

A garnishment reduces your disposable income. Lenders see you as higher risk because you have less money for new payments.

Many lenders will deny applications once they learn about active garnishments. Others may offer loans with higher interest rates.

How to Avoid Wage Garnishment

You have options even if you’re struggling with debt. Taking action early prevents garnishment and protects your wages.

Negotiate a Payment Plan

Contact your creditor before they sue. Many creditors prefer payment plans over lawsuits.

Explain your financial situation honestly. Propose a monthly payment you can actually afford.

Get any agreement in writing before you send money. Verbal promises don’t protect you.

Consider Debt Settlement

Creditors often accept less than the full balance. They’d rather get something than nothing.

Never offer full payment as your first settlement offer. Start at 25-50% of the balance.

Debt collectors expect negotiation. They’ve already bought your debt for pennies on the dollar.

You can negotiate directly or use our partner Solo to handle settlement discussions professionally.

Explore Debt Management Plans

Debt management plans work well if you have multiple unsecured debts. A credit counselor consolidates your payments into one monthly amount.

The counselor distributes payments to each creditor according to the plan. You make one payment instead of juggling multiple due dates.

Most plans reduce interest rates and waive fees. You become debt-free faster while avoiding garnishment.

File for Bankruptcy

Bankruptcy stops wage garnishment immediately through automatic stay. The court prohibits creditors from collecting while your case proceeds.

Chapter 7 bankruptcy discharges most unsecured debts within months. Chapter 13 creates a repayment plan over three to five years.

Bankruptcy seriously damages your credit for years. Consider it only when other options won’t work.

What to Do If You’ve Been Sued

You received a lawsuit summons. You have limited time to respond, typically 14 to 30 days depending on your state.

Ignoring the lawsuit guarantees you lose. The court issues a default judgment, and garnishment follows automatically.

Request Debt Validation

Debt collectors must prove you owe the debt. Send a debt validation letter within 30 days of first contact.

Request documentation showing:

• The original creditor’s name
• The original account number
• The amount you allegedly owe
• Proof the collector owns the debt

Collectors must stop collection activity until they provide validation. Many can’t prove they own the debt.

File an Answer to the Lawsuit

An Answer is your written response to the lawsuit. You must file it with the court within the deadline.

Your Answer addresses each claim in the Complaint. You admit, deny, or state you lack knowledge about each allegation.

Include affirmative defenses that explain why the plaintiff can’t win. Common defenses include:

• The debt exceeds the statute of limitations
• You already paid the debt
• The collector lacks proof of ownership
• The debt amount is incorrect
• You never received proper notice

Our partner Solo helps you prepare and file a proper Answer in all 50 states.

Send Your Answer to the Court and Plaintiff

File your Answer with the court clerk before the deadline. Send a copy to the plaintiff’s attorney by certified mail.

Keep proof of filing and mailing. You’ll need evidence you responded on time.

Missing the deadline means automatic loss. The court enters a default judgment against you.

Stopping Wage Garnishment After It Starts

Garnishment has already begun. You still have options to stop it.

File for Bankruptcy

Bankruptcy’s automatic stay stops garnishment immediately. Your employer must stop withholding once they receive notice.

Chapter 7 discharges the underlying debt. The garnishment ends permanently because the debt disappears.

Chapter 13 includes the debt in your repayment plan. Garnishment stops while you make plan payments.

Challenge the Garnishment in Court

Some income is exempt from garnishment. Federal and state laws protect certain funds.

Protected income includes:

• Social Security benefits
• Disability payments
• Veterans benefits
• Child support received
• Workers’ compensation

File a claim of exemption if your income qualifies. The court reviews your claim and may reduce or eliminate the garnishment.

Negotiate a Settlement

Creditors want payment, not garnishment. Garnishment is slow and inefficient for them.

Offer a lump sum settlement to stop garnishment. Many creditors accept 40-60% of the balance.

Get the settlement agreement in writing before paying. The agreement should explicitly stop the garnishment.

Rebuilding Your Credit After Debt Problems

Your credit score has dropped because of missed payments and collections. Rebuilding takes time but follows a clear path.

Make All Future Payments on Time

Payment history is the most important credit factor. Never miss another payment on any account.

Set up automatic payments so you never forget. Even one missed payment can undo months of progress.

Keep Credit Card Balances Low

Credit utilization makes up 30% of your score. Keep balances below 30% of your credit limits.

Paying down balances quickly improves your score. Even small reductions make a difference.

Don’t Close Old Credit Accounts

Length of credit history matters for your score. Keep old accounts open even if you don’t use them.

Closing accounts reduces your available credit and shortens your credit history. Both hurt your score.

Add Positive Payment History

You need new positive information to outweigh old negative marks. Consider a secured credit card or credit builder loan.

These products report to credit bureaus just like regular accounts. They help rebuild your credit with low risk.

Understanding Your Rights

Federal and state laws protect you from abusive collection practices. Know your rights so you can enforce them.

The Fair Debt Collection Practices Act

The FDCPA prohibits harassment, lies, and unfair practices by debt collectors. Violations give you grounds to sue.

Collectors cannot:

• Call before 8 AM or after 9 PM
• Contact you at work if you ask them to stop
• Threaten violence or arrest
• Lie about debt amounts or legal status
• Discuss your debt with others

Document every violation. You can sue for damages up to $1,000 plus attorney fees.

State Garnishment Limits

Federal law caps garnishment at 25% of disposable income. Many states impose lower limits.

Some states prohibit wage garnishment entirely for certain debts. Others protect more income from garnishment.

Research your state’s garnishment laws. You may have more protection than federal law provides.