Credit Q&A: If My Lender Doesn’t Report, Can Bad Loans Hurt My Score?

Credit Q&A: If My Lender Doesn’t Report, Can Bad Loans Hurt My Score?

Q: I have a commercial loan (in my name) that is likely to go to foreclosure or be given back via a deed in lieu. The loan currently does not show up on my personal credit report and I have an email stating my lender does not report to credit bureaus. Is there any way the foreclosure or deed in lieu could be reported and then show up on my credit report? – Derek

A: Generally speaking, any information that isn’t reported to the credit bureaus isn’t going to impact your score.

However, even if your lender doesn’t report to the bureaus directly, there are a few scenarios that could cause the information to wind up on your credit report – and subsequently hurt your score – anyway. For instance, the lender might decide to outsource the debt to a collections agency that is in the habit of reporting to Equifax, Experian and TransUnion. (As MainStreet has previously reported, most lenders in the habit of reporting to collections do so after a bill is around 90 days delinquent, and a debt owed to a collection agency can cost good scores around 100 points.)

Additionally, if the lender were to successfully sue you for payment then the judgment could show up. Judgments can wind up costing consumers up to 160 points off their score, depending on where it was to begin with. They also stay on your report for up to seven years.

If the loan were to enter foreclosure, however, that could wind up sparing your credit score.

“Foreclosure is a public record but the credit bureaus do not pick up that type of public record,” says John Ulzheimer, CEO of SmartCredit.com. “They just pick up bankruptcy, liens and judgments. So if the lender never reports the foreclosure to the credit bureaus as part of the account history, then it won't show up on the credit report.”