People like to think that a credit report has a complete list of the debts that a person owes, but this isn’t true. I regularly pull credit reports when I meet with new clients so that I can find as many accounts as possible and do a thorough job. I go through the reports with people and they are often surprised about the things that AREN’T on the credit reports.
There are entire categories of debts that never appear on credit reports at all. Here they are:
- Judgments and court cases against you. In some states, these appear on credit reports, but in Minnesota they do not. A good lawyer knows how to search and find judgments so that they can be included in the bankruptcy.
- Taxes and tax liens. In some states tax liens appear on credit reports like judgments, but not in Minnesota. You can owe tens of thousand of taxes and still have a good credit score because the taxes aren’t on your credit reports. Not even the tax liens appear. There is a separate computer system called the UCC database where the tax liens are stored.
- Many business loans. Credit reports are for consumer credit reporting. Larger business loans do not generally appear on credit reports. For example, loans to buy an apartment building and business lines of credit over $100,000 often don’t appear on credit reports.
- This can be surprising because sometimes people interpret the absence of a business debt on a credit report to mean that there is no personal guarantee for the debt.
- Small business credit cards often do appear on credit reports.
- Medical Bills. Medical bills aren’t really loans, they are services that haven’t been paid for yet. Credit Reports generally show loans. Because of medical privacy reasons, most hospitals and doctors do not want to report to credit reports either.
- Medical bills can show up on credit reports after the bill has been sold to a debt collector. Collections accounts regularly appear on credit reports, and these are often for medical bills.
- Utilities. Things like Xcel Energy or Centerpoint Energy often don’t appear on credit reports even though people can owe thousands of dollars for utilities.
- Internet and cell phone bills often do show up on credit reports. this is especially true if they have been sold to a collection company afterwards.
- Payday Loans. Sure, some payday loans do show up, like Ace Cash Express, or Finwise/Opploans, but many don’t show up on credit reports at all.
The credit bureaus don’t actually go out and find information about people on their own. The credit bureaus take submissions from loan companies that show how much the loans are for and whether they were paid or not each month. The credit bureaus then make a report from all of the data from loan companies. The loan companies (your car loan, credit cards, and mortgage) have no duty to make these submissions at all, and often times they don’t want to spend the time on it.
Some loan companies don’t even report to credit bureaus at all. This is a common reason why smaller payday lenders don’t appear on the credit reports. It is expensive to have someone devoted to making sure that the credit reporting is correct, and a single store front with only a few employees won’t be able to devote time to getting it right.