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Topics addressed on September 3, 2008:
Loans from your 401k do not appear on your credit report
Can my portfolio/mutual funds/401k be added to my credit report, depicting net worth? Is there a section on the credit report that shows a person’s net worth? Can personal loans that I have taken from my 401k and paid back faithfully be added as positive information to my credit report?
Credit reports only include information about debts. They do not include details about income, investments or assets. So, details about your investment portfolio, mutual funds or 401k cannot be added to your credit history.
You provide income to your lender when you complete your credit application. For large loans, like mortgages, you may be asked to document your income and assets. Those details, along with your credit history, help lenders determine your overall debt-to-income ratio, as well as your capacity to manage the new debt.
Loans from your 401k are not part of your credit report, either. Such loans are essentially loans to yourself from your retirement savings. They are not debts in the traditional sense, and there is no experience that indicates they are a good indicator of how you would manage a normal debt such as an installment loan or credit card. That is one reason they are not part of your credit report.
Equally important is that federal law has specific requirements for reporting a debt that probably could not be met by funds borrowed from your 401k. For instance, the entity reporting account information must update it regularly and must be able to respond to disputes from the consumer if there is any question about its accuracy.
Because you are “borrowing” your own money, a 401k loan would not be able to comply with the law. Additionally, the reporting entity must be a subscriber to Experian’s services so that we can ensure they meet our security requirements, reporting standards and verification procedures. That is a highly technical and very expensive proposition that would prohibit reporting just one loan or credit account
Thanks for asking.
- The "Ask Experian" team