Faith and love
1 John 4:7b states: "Everyone who loves has been born of God and knows God." I believe that Scripture is the perfect, inerrant Word of God and so I want to know how to understand these words when I know an atheist who shows a lot of love to people but does not know God.
Context provides the answer to your question. In 1 John 4 the subject is Christian love: Christians showing love to one another. In the verse you cited, the apostle John explains that Christian love is the outward evidence of Christian faith. When God the Holy Spirit changes hearts through conversion and gives people spiritual life, there is evidence of that in Christians’ lives of love. Jesus’ parable of the sheep and the goats (Matthew 25:31-46) illustrates that truth. The book of James also treats that subject extensively.
Outward acts of love are not necessarily evidence of Christian faith. Unbelievers may do nice, loving things in life, but those nice things are not proof of saving faith. People who are separated from Jesus Christ because of unbelief are not able to do loving things that are pleasing to God (John 15:5; Hebrews 11:6).
Your question demonstrates one of the great differences between God and people: “The Lord does not look at the things people look at. People look at the outward appearance, but the Lord looks at the heart” (1 Samuel 16:7).
I commend you for your attitude of wanting to understand how the “perfect, inerrant Word of God” applies to a situation in your life.