"At telemetry levels Enhanced and Full, Microsoft uses Linguistic Data Collection info to improve language model features such as autocomplete, spellcheck, suggestions, input pattern recognition, and dictionary. For more info, see the Get to know me setting in the Speech, inking, & typing section of this article and the Send Microsoft info about how I write to help us improve typing and writing in the future setting in the General section of this article. Note

Microsoft doesn't intentionally gather sensitive information, such as credit card numbers, usernames and passwords, email addresses, or other similarly sensitive information for Linguistic Data Collection. We guard against such events by using technologies to identify and remove sensitive information before linguistic data is sent from the user's device"

Of course, they can't know if anybody is typing the password in the wrong field or at the time they didn't expect.