The following article is presented for informational purposes only and is not intended as credit repair advice or instruction.
Ask the Experts: Is it a bad idea to keep this garnishment?
My wages are being garnished by the Department of the Treasury. I actually have the money to pay the debt but only obtained it recently, and the garnishment was already in place. Is it a bad idea to let the garnishment continue? It's quite convenient. –Maryann
From a credit perspective, the damage has more or less been done. The fact that an old debt, either a credit debt or a tax debt, is being paid through a garnishment does not usually show up on most credit reports. What does show up is the fact that the debt was delinquent and that there is a judgment against you for the unpaid debt.
Like with most negative marks on your credit history, the delinquency and the judgment will eventually fall off your report after seven years. There’s nothing you can do to speed up that process. Paid or unpaid, that judgment will stay there for the full seven years and unfortunately it will have a negative impact on your score until then.
So should you just let the garnishment ride since it’s so handy? You could, but it may be in your best interests to simply pay off the debt and be done with it.
There are two reasons why you may want to consider ridding yourself of the garnishment. The first is in the event that you need to apply for a loan. While your credit report will not contain any information related to your garnishment, the loan application itself will almost certainly require you to list any liabilities, which would include the fact that your wages are currently being garnished. Given that your credit score may already be somewhat damaged, having an ongoing garnishment will only make borrowing more difficult.
The second is a budgeting concern. While it may be convenient, that garnishment eats up a portion of your monthly budget, which takes away some of your budgeting flexibility. The counter-argument here, however, is that you could potentially shift the money you would use to pay off the judgment to an emergency savings account.
Ultimately, you should pick whichever strategy best matches your financial goals going forward. If you like the garnishment and you don’t plan on needing a loan any time soon, then feel free to leave things as they are.
Thanks for the question!