Does Having Your Wages Garnisheed Affect Your Credit Score?

Wage garnishment can have a serious impact on your financial stability: Under federal law, private creditors can take as much as 25 percent of your post-tax earnings. If you default on a student loan or a tax liability, you may be subject to a wage garnishment of up to 50 percent. Although a wage garnishment does not appear on your credit report, it may have several indirect effects on your credit score.

Late Payments

Wage garnishment is typically a last resort for creditors. If you miss debt payments, creditors usually make exhaustive efforts to contact you via letters and telephone calls to persuade you to catch up your past-due payments. Typically, by the time a creditor opts to garnishee your wages, you have already fallen 90 or more days behind on your account. Your creditor can report late payments when your account becomes 30, 60 or 90 days past due. Past-due entries in your credit file can dramatically reduce your credit score.

Judgment

Before a private creditor can garnishee your wages, it must obtain a legal judgment against you by filing a lawsuit in your county's civil court system. The lawsuit filing and the court's issuance of judgment become public record, which means that anyone can access this information through your county's courthouse. Judgments, like other public records such as bankruptcies, also appear on your credit report. The presence of public records can have an even larger impact on your credit score than late-payment entries.

Liens

A civil money judgment typically creates a lien on any real estate you own. The judgment creditor retains a financial interest in your property until you pay the judgment debt in full. Once the court places a judgment lien on your property, you cannot give away or sell the property without paying the debt. Like judgments, property liens are public record, and typically appear on your credit report and lower your credit score.

Debt Payment Difficulties

A wage garnishment can also indirectly affect your credit score by making it difficult to pay your other debts. Courts do not consider how a reduction in earnings caused by a wage garnishment will affect your ability to meet other debt obligations such as mortgage, installment loan and credit card payments. If a wage garnishment does not leave you enough money to pay your other debts, your other creditors can report late-payment entries as you begin falling behind.