Do Private Notes Affect a Credit Score?

Your FICO credit score is one tool used by lenders to determine your creditworthiness. Your FICO score is a ranking based on information contained in your credit report. Your credit report contains information transmitted to the three major credit reporting bureaus -- Experion, TransUnion and Equifax. A private note, such as a loan from an individual rather than from a financial institution, may not affect your credit score at all.

Information Used

There are five categories of data used to calculate your credit score. Each category carries of percentage value indicating its importance in the calculation. The five categories are payment history, amounts owed, length of credit history, new credit and types of credit used. All this information is fed through FICO's proprietary scoring formula to form your credit score. A private note could figure into several categories, including payments, amounts owed and types of credit. Not all creditors report their accounts to the credit bureaus, and if the person holding your private loan does not report it, it does not affect your score.

Weight

The two most important data types are payment history and amounts owed, which, together, make up 65 percent of your score. If you pay your debts on time, it has a positive effect on your credit score. If you made late payments in the past but have corrected that habit, your older payments count less than the newer ones, so paying your current bills on time will improve your score. Paying down your debt rather than moving it around, also helps your score. If your private note was reported to the credit bureaus, paying this on time should help your score. If it wasn't reported to the credit bureaus, it will have no effect.

New Credit

New credit represents just 10 percent of your credit score and includes new accounts you have opened, number of recent credit inquiries, the time since your last account was opened and the type of accounts opened recently. If the lender with whom you have the private note checked your credit prior to issuing the loan, that constitutes an inquiry, and it will hurt your credit score slightly. It will also adversely your credit score slightly if the lender reports the loan itself because new credit affects your score. However, if the lender does not report the subsequent payments, the score will not be affected in the amounts owed and payments made categories. If the loan is reported, ensure the payments are credited.

Building Credit

If you took out the note with the intention of building your credit, you cannot self-report to the credit bureaus, but you can ask the lender to report it for you. If the loan is reported but payments are not, and the lender refuses to report them, you can file an error report with the three credit bureaus, provide proof of your payments and request that they correct your file.