Will a wage garnishment show up on your credit report?

When you fail to pay a debt to a creditor, the creditor has the option of suing you to recover the unpaid balance of your account. If the judge presiding over the case rules in favor of the creditor, the result is a judgment against you. When this occurs, the creditor can garnish your wages as well as intercept your state tax refund.

Garnishments

When a creditor files for a wage garnishment against you for an unpaid debt, the creditor will then submit a request to your employer to take a percentage of your wages from each pay period. The federal government limits wage garnishments for creditors to 25 percent of you disposable income. You can have up to 50 percent of your disposable income subject to garnishment for spousal support, child support and tax payments. Individual garnishment deductions do not show up on your credit report.

Judgments

Before you can have your wages garnished by a creditor, you have to have a judgment for the debt filed against you. This happens when the creditor sues you in court. Once the judge awards the judgment to the creditor, the judgment will show up on your credit report under the "Public Records" section. This information will remain on your credit report for up to seven years. Once you pay off the judgment, the judgment remains on your credit report but reflects as paid.

Student Loans

If you default on a student loan insured by the U.S. Department of Education, the Department can garnish your wages before going to court and getting a judgment in your student loan lender's favor. Student loans insured by the Department of Education include Stafford, Perkins and Federal Parent PLUS loans. The Department of Education refers to this as an Administrative Wage Garnishment or AWG. The Department does not report AWGs to the credit bureaus, so the garnishment does not appear on your credit report.

Considerations

A way to avoid wage garnishments from creditors is to discuss payment options with the creditors before they file suit against you. Creditors are often willing to work out a payment plan with people who are delinquent or in default. A payment plan helps to avoid a lawsuit and subsequent wage garnishment by the creditor. It also prevents a judgment from appearing on your credit report. Student loan lenders also have financial or economic hardship forbearances for borrowers who cannot afford to make their student loan payments. Entering into a forbearance prevents student loan wage garnishments.