Reason Codes: What They Mean for My Credit Score – Episode #109

February 4, 2009 by  
Filed under Episodes

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.

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.
rans 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.