How to Get All the Inside Info on Your Credit Score

reason code

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:

reason code

Image credit: ReasonCode.org

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:

reason codes

Image credit: 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:

reason code

Image credit: Equifax

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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