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.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 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 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% 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 Month/Day/Year, 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 08/21/18. 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 firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
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 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|