Ever Ask "What do the reason codes on my credit report mean"?

By
Mortgage and Lending with Finance of America Mortgage LLC NMLS# 1004324

Over the last few years, there has been much attention brought to telling consumers how important it is to know what is on their credit before they need to have it pulled.  This is very true, however, most of us don't have any idea how to read and understand all the information that is on a credit report.

For example, every credit report includes a list of "reason codes" with numbers and a short explanation of what the number means.  Unfortunately, without fully understanding what those mean, it really doesn't do you any good.

Let's say that your credit report listed a "reason code" of "42".  The short explanation might say, "The date you opened your newest bankcard or revolving account is too recent."  So, what does that mean?

Well, I will share with you a website that allows you to type in the "reason code number," and it will not only give you the details of what it really means, but also suggest what you can do to improve your credit score!

Again, back to reason code #42 - Here are the long explanation comments:

Bankcard accounts include credit cards and charge cards from a bank and are frequently revolving accounts. Revolving accounts allow you to carry a balance and your monthly payment will vary, based on the amount of your balance. The bankcard or revolving account that you opened most recently is still too new. A credit file containing older accounts will have a positive impact on your credit score because it demonstrates that you are experienced managing credit.

Here's their advice on what to do to better your score:

Don't open more accounts than you actually need. Research shows that new accounts indicate greater risk, especially if overall account history isn't long. Your score will benefit as your accounts get older.

The website is www.ReasonCode.org.  It has videos, FAQ's and other links where you can type in the reason code and the explanations appear.

Please feel free to contact me if you'd like my help in explaining "reason codes" on your credit report.  I can also offer advice on what to do to increase your credit scores.

Comments (12)

Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

I was in Eddie Bauer today and they told me of the extra discount if I opened an account with them. Southwest Airlines sends me something every month about using their card and getting free frequent flyer miles. I would rather have the good credit versus some short term free stuff.

Jun 23, 2014 07:40 AM
Ann Zieve
Keller Williams Success Realty - Eden, UT
Unmatched Ownership Experience

Thank you for sharing this post Krista! Very informative. This would help our clients to manage credit properly.

Jun 23, 2014 08:29 AM
Bob Force (REALTOR®)
Weichert Realtors - Aspen Hill - Mount Airy, MD
The FORCE in Maryland Real Estate

Krista:

Thank you.  This will be a great help in talking with new clients, especially first time home buyers.

Jun 23, 2014 11:11 AM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Thanks for this important information.  I had never heard of  www.ReasonCode.org.  _I'm going to have to check it out.

Jun 23, 2014 12:07 PM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Even I didn't knowsome of this  this after about a decade LOL.

Jun 23, 2014 03:32 PM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Krista, thanks for posting this information. The site should be a big help in analyzing the scores. Bookmarked!

Jun 23, 2014 11:35 PM
John Jonas
ReplaceMyself - Virtual Assistants - Highland, UT
John Jonas

Krista, you got a good post here. Surely, it will help home buyers, especially those who haven't experienced the whole thing yet. Keep 'em coming!

Jun 24, 2014 12:10 AM
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

That code be a very important website for people to be familiar with.

Jun 24, 2014 12:17 AM
Krista Thomsen
Finance of America Mortgage LLC - Spirit Lake, IA
Loan Officer

This site is extremely useful for clients that I work with who want to improve their credit, but aren't sure where to start.  I'm not a credit counselor, but I do offer sound advice on the basics, and I feel this is something anyone can use and understand where the creditors are coming from when looking at their credit history.

With all the fraud guard companies and the increase in the need for them, I advise all clients to pull their credit twice a year and review it based on these codes.  If they find a discrepancy, they should immediately act on it.

Again, what good is it for buyers to get excited and find a home they want, only to find out that their credit has been effected negatively due to inaccurate information?  This likely would cause them to lose the home due to the amount of time to clear up the issues on their credit.

Jun 24, 2014 12:39 AM
Michael Frank
American United Mortgage Corp. - Sandy Springs, GA

Thanks for sharing that web site. It's always good to know about more resources.

Jun 24, 2014 01:52 AM
Rachel Khoury
Tailwinds Mortgage - Highlands Ranch, CO
Your Wingwoman for Colorado Mortgages

Great information, Krista, thanks.  I don't always think it necessary for the borrower to look at their credit scores before trying to obtain credit, however; because, at least with me, they will receive a copy of the report I pull and we will go over it together, line by line.

Jun 24, 2014 03:13 AM
Sybil Campbell
Fernandina Beach, FL
Referral Agent Amelia Island Florida

Thanks so much for the very useful information.

Jun 24, 2014 04:39 AM