Does Garnishment Hurt Your Credit Score?

A garnishment is a legal process where a portion of a debtor’s wages or bank account is seized to satisfy an unpaid debt. While garnishment itself may not directly appear on a credit report, the underlying financial issues that lead to it significantly impact credit. This article explains how the foundational debt affects credit scores and outlines steps to review credit reports and rebuild credit.

Understanding Garnishment

Garnishment results from a court order obtained by a creditor to collect an unpaid debt. It is a legal enforcement mechanism, not a voluntary financial transaction. Common forms include wage garnishment, where an employer withholds a portion of earnings, and bank account garnishment, which involves funds seized directly from an account. This process serves as a method for creditors to recover funds when other collection efforts have not been successful, signaling a debt has progressed to a serious stage.

How Garnishment Impacts Credit

Garnishment itself does not appear directly on credit reports. Instead, credit damage stems from the financial distress and delinquent accounts that preceded it. These underlying issues severely impact credit scores.

The original delinquent debt, marked by missed payments, directly affects payment history, a significant factor in credit score calculations, accounting for about 35% of a FICO Score. Accounts that become severely past due may be sent to collections or charged off by the original creditor, both negative entries on a credit report. A charged-off account indicates the creditor has deemed the debt a loss, though the individual remains legally obligated to pay it. Collection accounts can remain on a credit report for up to seven years, negatively influencing credit scores.

Court judgments, which often precede garnishment, appear on credit reports as public records and are detrimental. While civil judgments were removed from credit reports by major credit bureaus in 2017, lenders can still access this public information through other databases. These judgments signal a court ruling against an individual due to a financial dispute, indicating a high risk to potential lenders. A judgment can significantly lower a credit score and make it challenging to obtain new credit.

The reduced income from garnishment can make it difficult to meet other financial obligations on time. This can lead to additional missed payments and delinquencies on other accounts. Each subsequent late payment or collection account further lowers the credit score, impacting factors like payment history and amounts owed.

Reviewing Your Credit Report

Reviewing your credit report is essential to understand the specific negative items impacting your credit score after a garnishment. You can obtain a free annual copy from each of the three major nationwide credit bureaus—Equifax, Experian, and TransUnion—through AnnualCreditReport.com. Use this official website to avoid sites that offer services for a fee.

Once you access your reports, look for entries such as late payments, collection accounts, and charged-off accounts. Although garnishment itself may not be listed, court judgments, if applicable, appear in the public records section. Review all sections for accuracy, including personal information, account details, and inquiries. If you find inaccurate information, dispute it with the credit bureau and the entity that provided the information.

Steps to Address Debt and Rebuild Credit

Addressing the debt that led to garnishment and rebuilding credit requires a deliberate approach. Contact the creditor to explore payment arrangements or settlement options for the original debt. If debt is overwhelming, consider options like debt management plans through a reputable credit counseling agency or, in some cases, bankruptcy.

To rebuild credit, consistently making all future payments on time is essential, as payment history is the most influential factor in credit scoring models. Reducing existing debt and keeping credit utilization low can also improve scores. Consider using secured credit cards or small credit-builder loans, as these help establish a positive payment history when used responsibly. Regularly monitoring your credit reports will allow you to track improvements and ensure continued accuracy.