Credit Reports contain negative comments even with credit scores in the upper 700 range. For example, “too many inquiries” is common. The critique comes in the form of a “Reason Code”.
Reason Codes & What They Mean
Credit Reporting Agency’s such as Experian, Equifax and TransUnion must list reasons why your credit score is not perfect. This has to be done according to the Fair Credit Reporting Act. Common Reason Code examples include:
- Age of accounts
- Ratio of balance to limit on revolving accounts too high
- Total balance of all accounts is too high
- Too many inquiries
What are Credit Report Reason Codes For?
Simply put, Reason Codes are guides. The intent behind the law requiring credit report / credit score reason codes is good. Primarily, knowing why your score is not perfect allows you the chance to fix it.
In other words, seeing the reason code for “ratio of balance to limit on credit cards” helps. You know to focus on lowering that very ratio to boost your credit scores.
Leverage Reason Codes into a Higher Credit Score
Reason Codes appear in order of impact. For example, codes listed first address what is impacting your credit score the most. Conversely, Reason Codes listed last reveal what is impacting your credit score the least out of all listed Reason Codes listed.
Reason Codes tell you what to work on first in order to see the biggest increase to your credit score. However, Reason Codes are general explanations. In order to obtain detailed guidance, contact a credit professional.