Ever wonder why your credit score is what it is? Maybe you have some idea of the answer but would like some more specifics.
You’re in luck. Not a lot of people are aware of this yet, but when you review your credit score you have access to codes that explain why your score isn’t higher than it is. And those codes can help you in your quest to achieving your ideal credit score.
Now you just have to know where to find them! Read on to learn all about the credit score reason code so you can unlock the secrets behind your credit score.
What is a reason code?
A reason code is a two-digit number that corresponds with a reason for why your score is what it is. According to VantageScore, credit reporting companies typically provide four of these codes with each credit pull.
The purpose of these codes, also called credit score factor codes, is to explain the reasoning behind your score. And this is something that’s become legally mandated. ReasonCode.org explains this further:
“A lender is required by federal law to provide a consumer with a disclosure notice if his or her credit report data is used in the review of a loan application, and the application is either denied or is approved but with less than the best terms offered.”
This disclosure notice requirement aims at creating more transparency in lending. And it’s in this notice that you can see your reason code:
“The disclosure notice contains both your score and the reason codes explaining why your score isn’t higher and usually arrives in the form of a letter. It also indicates which credit reporting company […] supplied your score to the lender.”
Keep in mind that these reason codes aren’t the equivalent of why you may have been denied for credit. They’re just reasons for your current credit score. Though your credit score might factor into the reason you were denied for credit.
If you’re curious to see what these reason codes might look like, here’s a list to help. Notice when you review the list that different credit score models might vary the codes a bit from each other, though it’s infrequent. But when you type your code into ReasonCode.org, it will autofill and show you some suggestions to help you find the right one.
How to evaluate your reason codes
If you’ve recently been sent an adverse action notice, then go straight to your reason codes and type them into ReasonCode.org. When you do, you’ll see an explanation for each code that will give you the details you need to move forward.
Let’s look at an example. Say you’ve found out one of your reason codes is 07. Typing that into ReasonCode.org, here’s what you’d see:
As you can see from this screenshot, you not only get an explanation, but you also get guidance for next steps. That means you can learn what needs improvement and just how you can make it happen.
Let’s try another. Let’s say another code you got was 31. Here’s what you’ll see on ReasonCode.org:
The advice is pretty similar. But if you have a longer credit history, you could see much more varied reasons and action items.
If you’ve recently pulled your credit report (which you can do for free at AnnualCreditReport.com), you might even see your reason codes there. Here’s a screenshot from a sample Equifax credit report:
An important reminder when you utilize your reason codes
Once you get the explanation with your reason codes, the next steps might seem fairly clear. The guidelines are spelled out for anyone who needs them, and even free credit score reports show you quite a bit of information these days.
But even with the advice, it might seem difficult to know where to go from there.
The most important thing to keep in mind when you’re reading credit score advice is that you don’t have to follow all of it blindly. If you’re being told you need to increase your credit limit or use revolving credit but you know you can’t control your spending on credit cards, then you don’t have to take that advice.
You could try other ways to build your credit instead, such as asking your landlord to report your rent payments to the credit reporting companies or using secured credit cards to build credit since the limits are much lower than traditional credit cards.
The point is, make sure that any advice you follow will be just as good for your money as it will be for your credit. As important as credit scores are, sinking your finances to implement credit score advice is never a good idea.
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of August 11, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 5.80% per year for a 5-year term, 3.30% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.69% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 3.94% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.98% (with autopay) to 6.90% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of June 26, 2020, the one-month LIBOR rate is 0.18%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.18% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.18% per year to 3.66% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.41% per year to 4.30% per year for a 12-year term, 3.18% per year to 6.65% per year for a 15-year term, 4.54% per year to 6.90% per year for a 20-year term, or 4.43% per year to 7.02% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
Variable APRs and amounts subject to increase or decrease. Variable rates are indexed to the one-month LIBOR rate. The following Variable Rate examples are based on a $10,000 loan amount. Repayment examples are for illustrative purposes only. All student loan rates below are shown without the autopay discount (.25%). There are no application or origination fees, and no prepayment penalties. The monthly payment for a sample $10,000 loan with an APR of 2.18% per year for a 5-year term would be $176.07. The monthly payment for a sample $10,000 loan with an APR of 4.00% for a 7-year term would be $136.69. The monthly payment for a sample $10,000 loan with an APR of 2.18% for a 8-year term would be $113.61. The monthly payment for a sample $10,000 with an APR of 4.25% for a 10-year term would be $102.44. The monthly payment for a sample $10,000 with an APR of 2.41% for a 12-year term would be $80.04. The monthly payment for a sample $10,000 loan with an APR of 3.18% for a 15-year term would be $69.93. The monthly payment for a sample $10,000 loan with an APR of 4.54% for a 20-year term would be from $63.48. The monthly payment for a sample $10,000 loan with an APR of 4.43% for a 25-year term would be from $55.19.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for SoFi.
4 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of August 10, 2020. Information and rates are subject to change without notice.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.18% effective July 10, 2020.