Loan approvals are based on your credit history. While a wage garnishment does not appear on your credit history, the lawsuit preceding your wage garnishment does. This can affect your ability to get approved for a loan.
If you stop paying down a debt, your creditor may sue you and request a wage garnishment. A portion of each paycheck will be withheld to pay the debt.
Any lawsuit that results in garnishment leaves a judgment on your credit report. Judgments adversely affect your credit score and can cause you to be turned down for a loan.
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Garnishments for federally owed debts, such as taxes and student loans, do not require lawsuits. You may be garnished for these debts while maintaining decent credit, which increases your chances of a loan approval.
Even if you are still being garnished, you may get a loan approval if the judgment did not occur recently. As credit report entries age, they have less of an impact on your score.
Not all judgments result in wage garnishments. Because of this, a lender has no way of knowing that you are being garnished unless you volunteer the information.