Any advantage to paying off a garnishment early?

December 7, 2014 8:38 AM

I have the money to pay off a garnishment and am fine with doing so. I wonder if there is any benefit to paying it off early in terms of my credit rating.

I have about 3-4 more payment garnishments to go but have the money to pay it off early. Is there any benefit to doing so besides peace of mind and getting it off my employers desk? Does it benefit me credit-wise in any way?

posted by anonymous to Work & Money (3 answers total)

Alas, it's almost impossible to get straight answers from Credit Agencies about their algorithms for determining credit score, so getting an accurate answer to this may be close to impossible.

However, I know the following.

1) Paid off debts are better than non-paid off debts.
2) Adverse credit events "fall off" a credit report after some period of time (3 years? 7 years? 12 years? No one knows!)
3) History of consistent payment is, pretty much, the gold standard of credit reporting.

So knowing the above, how will the credit agency consider following.

1) Paid off debts are better than non-paid off debts. This would go in favor of paying off the garnishment.
2) Adverse events fall off. Well, is the garnishment an adverse event? I'm not really sure. On the good side you're developing a pattern of making payments. On the bad side you're not making these payments voluntarily, so they might not consider them a good thing as far as you may still not make voluntary payments. However, if it is an adverse event then paying it off a few months early will get you to the "fall off" date a few months faster. I'd say this is mildly in favor of paying off the garnishment.
3) History of consistent payment: Again, we don't know if the credit agency is treating an involuntary payment regime the same as a voluntary one. I sorta doubt they are. I'd say this one is a wash.


All in all, I don't think that making the payments early can be said to strongly influence your credit report. I'd focus on making the other payments in your life on time which we know is good for your credit report, and having the extra cushion you have now is good for that.

Keeping that extra money to build up your 6 month emergency fund cushion is probably the wisest course of action, if you don't have that cushion built up already. Otherwise, sock it away in a money market or low cost index fund.
posted by bswinburn at 9:34 AM on December 7, 2014

You'll be 4 months ahead of the damn thing falling off your credit report.

I'd do it in a heartbeat.
posted by Ruthless Bunny at 10:14 AM on December 7, 2014 [2 favorites]

You are also paying the judgment interest rate the entire time. Why would you want to do that if you have the money to pay it off? You might even be able to settle for less than the remaining garnishment balance if you call the attorney and make an offer. Time value of money and all.

But be prepared to be 1099'ed on the forgiven amount if you do reach a settlement.
posted by crazy sniffable at 1:25 PM on December 7, 2014