One of the biggest disappointments in life is seeing a copy of your credit score and realizing that it isn’t as high as you thought it would be. A high credit score is more than just a status symbol indicating that you are responsible with your money; it is also a measuring stick that financial service providers use to decide on a number of terms for products ranging from loans to insurance policies.
If you aren’t happy with your credit score, you can take steps to improve the situation. But how do you know what to work on? The answer is in the reason codes that accompany your credit score.
What are Reason Codes?
“Reason codes describe why your credit score isn’t higher,” says Jeff Richardson, a spokesperson for VantageScore Solutions. “They go by different names, including adverse action codes and score factors, but they amount to the same thing. They are descriptions of the why behind your lower score.”
If you can take the information contained in these reason codes, and make changes to your financial habits, you can improve your credit score.
Reason codes are actually numeric representations of explanations, so it can be a little difficult to figure out what the problem is. Some credit score reports simply list the reason codes as numbers, so the display might look something like this, with the most influential factor at the top of the list:
Your Credit Score: 680
- 32
- 16
- 12
That’s a little bit cryptic. Some credit score reports include basic explanations of what the code means, though. So your credit score report might also include the following display:
Your Credit Score: 680
- 32: Balances on revolving accounts too high in comparison to your credit limits
- 16: Total balances on your open accounts is too high
- 12: The date that you opened your oldest account is too recent
This provides you with a little more information. If the credit score provider offers you an explanation next to the reason code, at least you know what you might need to change in order to boost your score. In the case of this example, the consumer would need to pay down some of his or her debt and then keep his or her oldest credit account open to increase the age of his or her overall credit history.
The use of reason codes is a way for you to better understand why a mortgage lender didn’t give you the best interest rate, or why a credit card issuer approved you for a much lower credit limit than you expected.
But what if your score report just lists the numbers, without providing explanations for the reason codes? Even if your credit score report doesn’t contain explanations for the listed reason codes, you can still find out what your reason codes means.
Get More Information About Your Credit Score
You can use a site called ReasonCode.org to find out what various reason codes mean. ReasonCode.org is powered by VantageScore. “You can key the reason code from your score report into a search box, and the possible explanations pop up,” says Richardson. “You can enter your reason code and find out why you have been denied, or didn’t get the best deal.”
“Regardless of whether you have a low score or a high score, you’re going to provide a reason code,” Richardson says. “It’s more important for someone with a low score to make use of these resources, since it shows them what they need to do to improve the situation.”
At ReasonCode.org, you can also get specific suggestions related to the reason code. After searching for the code, you can see a fuller explanation. This goes beyond the single line often used on scoring reports. As a consumer, you can receive an in-depth explanation of what’s holding you back, and get specific suggestions for actions you can take to improve your score in the future.
“This provides you with more power as a consumer,” says Richardson, “and gives you insight into what’s really happening with your credit. Even for someone with a high credit score it can be useful. It provides insight, even if you don’t need to change your behavior.”
ReasonCode.org isn’t the only place you can get in-depth explanations of your reason codes, though. Quizzle also offers explanations for why your credit score might not be as high as you would like it to be.
Quizzle’s new partnership with Equifax, and the fact that Quizzle now uses VantageScore, makes it possible for you to receive even more information about your situation — and how to improve it. Because of the new partnership, Quizzle is leveraging the technology and resources of both companies to provide the new “Score Analysis” tool, which features the reason code explanations and specific suggestions directly inside of the free Quizzle account. That way you can review the free copy of your credit report, along with the reasons why your score isn’t higher, and get to work.
As with anything in life, knowledge is power when it comes to your finances. When you understand how to decipher your reason codes, you have the information you need to make better financial choices.
