Reason Codes: What They Mean for My Credit Score – Episode #109
What is a Reason Code on a Credit Report?
Because credit reports have a history of being cryptic, regulators asked the credit reporting agencies to provide a summary of sorts, reasons why your credit isn’t higher. When credit reporting agencies started to market their products to consumers, they started to provide 4 negative reason codes and 4 positive reason codes to consumers.
How Do These Impact My Credit Score?
The problem: these codes can often be confusing themselves. They often tell a consumer something vague, like you “opened too many credit lines recently” without telling you exactly how many points that cost you. Why don’t they tell you this? They are concerned that the credit scoring algorithm could be reverse engineered. This is a valid concern [sorry all] but don’t feel lost, you can usually see from the codes what steps might make sense.
| CODE | REASON | SOLUTION | CODE | REASON | SOLUTION |
| 01 | Amount owed on accounts too high | Reduce current account balances to below 30% of credit limits) | 22 | Serious delinquency, derogatory public record or collection filed | Settle this and request goodwill removal |
| 02 | Level of delinquency on accounts too high | Pay your bills on time | 23 | Too many bank or revolving accounts with balances (Equifax only) |
Reduce the balances and carry balances on only a few cards |
| 03 | Too few revolving accounts (Trans Union #33) |
Open more revolving tradelines,and keep them active | 24 | No recent revolving balances | Use at least some of your revolving cards. NO need to carry a balance, just use it and pay in full. |
| 04 | Too many revolving accounts (Trans Union n/a) | Close newest credit card accounts first | 26 | Number of revolving accounts (Trans Union NA) |
Use just some of your revolving cards. NO need to carry a balance, just use it and pay in full. |
| 05 | Too many accounts with balances | Limit activity to only a few accounts, and pay off other accounts | 27 | Too few accounts paid as agreed (Trans Union only) |
Pay off your cards. Bring them up to date. |
| 06 | Too many consumer finance accounts | Pay off consumer finance accounts on time, or preferably in advance | 28 | Number of established accounts (Equifax & Experian) |
Normally, I don’t suggest closing cards, but fyi, 800 score people have 10 accounts not 50 accounts |
| 07 | Account payment history too new to rate | Wait 6-12 months to reapply | 28 | No recent bankcard balances (Trans Union only) |
Use your cards. Pay in full. No need to carry a balance as balance is reported as “closing date” not “due date” |
| 08 | Too many recent account inquiries in last 12 months | Ask credit guarantors to consolidate or remove inquiries | 30 | Time since last account opening too short | Time heals. A longer account history is required |
| 09 | Too many accounts opened in last 12 months | Stop opening accounts. People who open too many accounts are riskier | 31 | Too few accounts with recent payment info. (Trans Union n/a) |
Use your cards, but pay them off in full |
| 10 | Proportion of balances to credit limit too high on revolving accounts | Reduce revolving credit balances to a lower proportion of credit limits. Aim for <30%. 10% if you are shooting for an 800 | 32 | Lack of recent installment loan information (Trans Union #4) | Request credit grantor to update information |
| 11 | Amount owed on revolving accounts too high | Keep $ amounts owed lower. Preferably less than $5,000. | 33 | Proportion of loan balances to loan amounts too high (Trans Union #3) |
Maintain balances below 30% of credit limits |
| 12 | Length of revolving credit history too short | Improve credit usage for 6 months and recheck | 34 | Amount owed on delinquent accounts (Trans Union #31) |
Reduce or eliminate all past due balances |
| 13 | Length of time (or unknown time) since delinquency | Time heals. You have to wait 6 months and recheck. Note: that delinquencies stay on for 7 years | 35 | Payment due on accounts (not used) |
Pay past due balance |
| 14 | Length of time revolving accounts have been established | Wait 6-12 months to reapply | 36 | Length of time open accounts have been established (not used) |
Time heals. |
| 15 | Lack of recent bank revolving credit information | Mixture of credit matters. Make sure you have bank credit cards | 37 | Number of consumer finance company accounts established relative to length of history. | Time heals. Don’t open more consumer finance loans. |
| 16 | Lack of recent revolving account information | Wait 6-12 months to apply or reapply | 38 | Serious delinquency and public records or collections filed | Settle delinquent debts, liens, or judgments |
| 17 | No recent non-mortgage balance information | Need credit and/or installment credit | 39 | Serious delinquency and public record or collection filed | Settle delinquent debt, lien, judgment, or collection |
| 18 | No. of accounts with delinquency (or Frequent delinquency - Trans Union) |
Multiple delinquencies need to be brought current and properly maintained | 40 | Derogatory public record or collections filed | Settle derogatory debt, lien, or judgment |
| 19 | Too few accounts paid as agreed (Trans Union #27) |
Pay your bills on time and in full | 47 | Number of consumer finance inquiries | Stop applying for consumer finance credit. Time heals. |
| 19 | Date of last inquiry too recent (Trans Union only) |
Wait a few months. This will disappear. Recent inquiry adversely influences scores. | 97 | Lack of recent auto loan information | Request creditor to update account information |
| 20 | Length of time since legal item filed (derogatory public record) or collection reported | Time heals. These will fall off in 7 years. No action needed. | 98 | Length of time consumer finance company loans have been established | Time heals. Pay as agreed or ahead of schedule to get these paid in full. |
| 21 | Amount past due on accounts | Pay past due balance | 99 | Lack of recent consumer finance company account information | Request consumer finance company to update account information |
I realize the chart above is a little daunting. So don’t worry about it. Just know it’s here for you if you want to check it. Most actions needed are really common sense. Pay your debts, be on time, keep balances low. Time can heal all wounds.
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- Credit Score Estimator Can Estimate Your FICO Score – Episode #89
- Length of Credit History: 15% of your Credit Score – Episode #83
- Credit Bureau vs. Credit Reporting Agency – Episode #77
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Hi, on my Transunion credit report I have old student loans with a balance of 0. These are rated – I0 – TOO NEW TO RATE
Should this be of any concern to me?
Old student loans with a balance of zero are a good thing. Credit scores like old accounts with balances of zero or paid in full. The best FICO score holders usually have a bunch of paid off loans.
I have 7 open credit cards, and a total available credit of $100,000. I paid down some of the credit cards recently, and now have a total of $33,000 in credit card balances. Three of the credit cards have balances of 70% to 90% of the total credit line. The other four have either no balance or a balance of less than 10%.
(Yes, I’ve been playing the 0% balance transfer game, which I’ve still been able to play despite the changes in the economy and credit card policies, although now I often have to pay a 3% balance transfer fee).
I have a perfect payment history going back over 20 years – I never miss a payment.
I also have a mortgage of $105,000 (on a $350,000 house) and a home equity line with a $40,000 limit on which I owe $24,000.
I’m going to apply for one or two more 0% credit cards soon. My question is whether it will look like I have too many credit cards and too much potential credit. I have three cards that are essentially unused with credit lines of $24,500, $20,000 and $5,000, respectively. Am I going to look better to the credit card companies if I keep these open, shut them down, or should I ask them to reduce the credit lines?
Don’t ask for reduced lines, and don’t close down credit cards. These actions will hurt your credit score. If your total open cards exceeds 10 cards, you might get dinged on your score, but it sounds like you have fewer than 10 cards. The people who get dinged tend to have 15-20 cards. But, make sure you have an end game to stop the 0% rollovers, which is sounds like you have. Great work!
Received a rejection letter today from Capital One, with a code that isn’t in the above list:
New account balances are too low (Equifax).
PS: The last time I opened a credit card was in October of 2008. My FICO score on Equifax was 774 as of last week.
Haven’t seen that one. Is there a code number? Can you scan it and email it me at info {at] videocreditscore.com? Note there are positive and negative reason codes so we should make sure these are negative codes.
My credit scores from Equifax, Experian etc. show a code of amount owed on accounts is too high. I don’t have any debt besides my mortgage which is low. No car payments, credit card debt etc. I pay off all of my balances every month and I have more cash in the bank that what I owe on my mortgage. What gives?
Credit scores can’t see how much you have in the bank. If you mortgage is high at all, you get this code. I get it for living/owning in California. No way to get rid of it until you pay down your mortgage significantly. It doesn’t usually weigh heavily on the score.
Hey Andy, to your last point, I also live in California and get the same response for my mortgage. My score is around the 800 mark, so I’m not terribly disappointed with that, but I can’t seem to get a credit card right now because if it. What percentage of my loan do I have to buy down in order to remove myself from this bucket? I have cash on hand that I could buy down the loan with, but I’m not sure whether or not that’s really worth it at this point just to get a credit card that better suits my needs. Thoughts?
This may not really be the reason you can’t get a credit card right now. The banks are just really tight with handing out new credit. I wouldn’t pay this down just to get a credit card. Perhaps consider using debit cards for 6 months and reapplying. Also, did you apply for a credit card from the same bank you have your savings/checking accounts? We have returned to the age where relationships matter and you may get an approval there.
Thanks for the prompt response! I’ve heard similar reasoning in regards to credit being tight, but I always figured I’d be a prime safe decision for a lender based on income, cash reserves and lack of debt outside of said mortgage. I have a credit card that is perfectly acceptable, I was just looking to add some arsenal that would better suit me in regards to rewards/returns. The upside of buying down my loan just isn’t there for me right now, so it’s probably a path I’m not going to go down at the moment, but out of curiosity, is there a general percentage of debt to loan amount that I would be looking to target? I’ve heard to keep it below 80% at very least, but I don’t know if that number holds water for any reason.
I haven’t heard of a debt to loan amount on the mortgage side for an ideal credit score. I do know that once you pay it off in full, your score will jump again. I’d just let time take care of this.