If the partners in an LLC personally guaranty a real estate loan, should the trade information be reported to the consumer credit report of each partner providing the guaranty? If so, should the entire amount of the loan be included in each partner's consumer credit file, or just the partial amount represented by that partner's percentage? In what reg would this be found? Thank you

We do not report guarantors to the CRAs, unless the loan goes bad and they do not make good on their guarantee.

The FCRA covers credit reporting.

We also don't report guarantors to the credit bureau, but if we did I would report the whole loan for any unlimited guaranty. I would only report a percentage if the guaranty agreement or loan agreement limited each guarantor to a specific amount.

Thanks for the response. I can't find reference in the FCRA about this. Do you not report because it is not permissible, or just your practice/policy?

Generally commercial debt is not reported to CRAs. We never had the automated system set up to report those obligated with the commercial system either. That could take a lot more trouble shooting than it is worth, if it isn't already in place. It also doesn't serve much purpose since it is indirect debt. The borrower should show it on a financial. And if the large debt amounts were shown on the bureau, what would that do to their scores? (I am asking, I don't know for certain.)

Someone told me that reporting LLC loans to a guarantors CB as a regular course of business if the loan is not in defualt is a violation of a regulation. I reviewed FCRA and can't find anything. I know that this causes a lot of operational challenges and customer complaints, but does anyone know of a regulation that prohibits this?

For anyone else who researches this it is legal. From FTC staff commentary section 607.

"(3) Guarantor obligations. Personal guarantees for obligations incurred by others (including a corporation) may be included in a consumer report on the individual who is the guarantor. The report should accurately reflect the individual's involvement (e.g., as guarantor of the corporate debt). "

I do not know any reason it would be illegal, just misleading and a good reason for someone to bank elsewhere. I also know Equifax, in particular, dislikes the idea as credit scores are not designed to factor in indirect payments on commercial debt.

Misleading - What's misleading about it? You have a guy that has personally guaranteed five or six other $1 million lines of credit to other LLCs and you are making another loan to a business partially on the strength of his guarantee. You don't want to know about the other guarantees and make sure that he is reporting this contingent liability correctly on his financial statement? Who cares what Equifax thinks. On a guarantee, why would they have to factor in any type of payment?

Yes, misleading.

First, consumer credit reports are not designed to enable a bank to verify contingent liabilities.

Second, the guarantor is a back-up, not the primary source of repayment. Accordingly, the guarantor (who often does not have direct access to the company checkbook) is not expected to ensure each and every guaranteed loan pays within the 30 day credit bureau reporting date.

As such, including loans that may run 30 - 60 days in the Credit Score of the Guarantor undermines the reliability of the credit report and the score as indicators of how the guarantor pays his/her direct obligations.

As an aside, any bank reporting guarantors monthly (as opposed to only if they default on their guarantee) better ensure they have given the Credit Report reporting disclosure to each and every guarantor before any loans go 30 days past due.