Credit Score Limitations

Credit scores are created from information included in your credit report. Each month, your creditors report information on how you manage your account to the three major credit bureaus. Creditors use your credit score to assess whether you are a low-risk or high-risk borrower. However, credit scores have limitations. Creditors cannot report any personal information to the credit bureaus.

Fair Credit Reporting Act

The Fair Credit Reporting Act gives consumers the right to know what's in their credit report. The information in your report reveals whether or not you are likely to repay your debt. For example, credit reports contain information on your accounts in good standing, late payments or any legal filings such as bankruptcy or judgments against you. The information in your report determines your credit ranking. Though your name, address and employment information is included in your report, the inclusion of any other personal information in your report is illegal.

Discrimination

The purpose of eliminating personal information such as race and gender in your credit report is to prevent discrimination. Consumers are protected under the Equal Opportunity Credit Act and Fair Credit Reporting Act from discrimination based on the information included in their credit files. Creditors cannot ask questions related to your familial status, religion, national origin or sexual orientation on your credit application, which means this information is not reported to the major bureaus or included in your credit score.

Salary

Salary information helps lenders determine whether you can afford to repay your debt. Credit scores do not reveal salary. Instead, creditors request salary information on your credit application to use as a deciding factor when issuing credit. Your credit score might reveal that you are unable to repay a debt while your income suggests the opposite. For example, if you have liens, judgments or large amounts of consumer debt relative to your available credit, your credit score decreases. However, you may have the income to support repaying your balances and judgments in full. Credit scores, however, are unable to reflect this fact.

Character

Though credit reports reveal a large amount of facts about your financial history, they do not reveal your personal character. People fall behind on payments and accumulate debt for a number of reasons, including a death in the family, loss of job or unforeseen medical expenses. These instances are beyond a consumer's control and reveal little about whether the applicant is usually willing to repay his debts. Credit scores also often are inconsistent, which prevents creditors from gaining an exact assessment of your credit habits. Not all credit bureaus report information identically, which can mean an applicant can fare better at one credit bureau than another.