What's Not in a Credit Report
Credit reports have a lot of information in them. If they tried to add any more, it probably would not even fit. Fortunately, there are plenty of things that are not, and cannot, be in your credit reports. Since the definition of credit report is somewhat fuzzy, this section only refers to credit reports issued by the three major credit reporting companies: Equifax, Experian, and TransUnion.
Hot Potatoes
There are several bits of information that cannot appear in your credit report. These are items that could potentially cause a lender to discriminate against you. Of course, you wouldn't want to work with lenders who discriminate anyway, but there are regulations that help to reduce discrimination.
Some of the items that are kept out of your credit report are the usual “hot potatoes” that can get lenders in trouble. These include:
Your ethnicity
Your religious beliefs and affiliations
Your political beliefs and affiliations
Your sex
Out with the Old
Credit reports are important because they let everybody know if you have been a responsible borrower in the past. If you have made mistakes in the past, it's reasonable to expect that you might make mistakes again. However, everybody makes mistakes, and ideally you learn from your mistakes. Therefore, old items need to be deleted from your credit reports so that you can get a fresh start now and again. After seven years, almost all negative items fall off your credit reports. These include:
Charge offs and settlements
Collections
Chapter 13 bankruptcy (Chapter 7 stays for 10 years)
Late payments
Once these items fall off your credit reports, it is easier to get loans and improve the terms on loans that you already have. You might not see dramatic changes, because the most recent items on your credit reports carry the most weight. However, you will see improvement.
As with most rules, there are always exceptions. The FCRA allows information older than seven years to appear in some situations. Presumably, these are situations where somebody is taking a great amount of risk on you, and they should be allowed to know more about you. These situations include:
Credit transactions for amounts greater than $150,000
Underwriting life insurance for more than $150,000
Employment for a job paying more than $75,000 annually
Other Business
The major consumer credit-reporting companies only create reports that deal with consumer credit. Other factors may be relevant to your creditworthiness; however they are not necessarily shown in your credit reports. If a lender, landlord, or insurer is going to use additional information, they have to get it somewhere else. They might ask you for the information on your application, or they might use a variety of other consumer reporting organizations to get the information they need.
Does everything fall off a credit report after seven to ten years?
No. If you have tax liens, they are not going anywhere until you actually pay the taxes you owe. Back taxes due to the IRS, for example, will not go away until seven years after you have paid the money due.
Rubber Checks
Consumer credit does not include your check-writing behavior. While writing rubber checks is probably a bad sign for lenders, it is technically not a credit account. However, don't get any wild ideas: there are consumer-reporting companies that track check-writing behavior.
ChexSystems, as well as a number of smaller companies, keeps files on consumers who have a history of mishandling their accounts. Note that ChexSystems operates differently from the major consumer credit-reporting companies. The credit-reporting companies track any information they receive, both good and bad. If you always pay as agreed, there is a record of it. On the other hand, ChexSystems only keeps a file on you if you have been reported for writing bad checks. In other words, it's good to have a credit file, but it's bad to have a ChexSystems file. Institutions that use Chex-Systems report bad-check writers, and check on new account applicants to see if they've had trouble in the past.
For people with no credit history at all, your check-writing behavior is very important. The FICO Expansion Score, a newer score for the previously “unscorable,” uses a variety of information other than your credit reports to determine your creditworthiness. One of the things they look at is how you have used checking accounts.
Medical Information
You will not find information about your medical history in a credit report issued by the major credit-reporting companies. As discussed elsewhere, that data is kept by the Medical Information Bureau, among others. However, confusion arises because medical bills can appear on your reports. Because accidents and sicknesses tend to be quite expensive, patients and their families often can't pay the whole bill at once. These bills sometimes show up as collection items.
In the past, one could make a pretty good guess at what happened based on your credit report. For example, there might have been an entry for The Broke-Your-Ankle Recovery Clinic or the Chronic Depression Treatment Center. In an effort to reduce discrimination, recent regulations require that these entries do not identify the type of organization where you originally received care. When a potential lender sees your credit report, the entry is identified only as a medical entry. However, when you look at your report, the entry is more detailed. This allows you to contact the information provider if you need to dispute the entry.
Not Applicable
You could list thousands of things that are just not relevant to your credit report. Your favorite color, night owl vs. early riser, and so on. While these examples might be obvious, there is no shortage of confusion about which consumer records and public records pop up in a credit report. In general, the only records that appear are those which would reasonably be related to your handling of personal financial matters.
Because a business loan is not a personal financial matter, business loans are not included in your credit report. However, keep in mind that if you signed on as taking personal responsibility for the loan, it will appear on your credit.
For many new businesses, a business loan is simply a personal loan, but the bank calls them business loans to make you feel important. One way to tell if it is a personal loan: did they ask for your Social Security Number? If yes, you are probably personally on the hook for any unpaid debts.
In addition, your criminal and driving records are not on your standard credit reports. If this makes you breathe easier, don't forget that other organizations do collect and sell that data. For lending decisions, you might not be affected by a few run-ins with the law. However, if you are seeking employment or licensing in a sensitive area, your prospective employer will surely purchase a background check and ask about any blemishes.
