If you’ve received a consumer copy of your credit report, or if you have received a letter from a creditor because you recently applied for a loan, you may have noticed a list of “reason codes” with numbers and a short explanation of what the number means. This explanation is usually vague, and most people don’t understand what it is saying.
For instance, if your letter or report lists a reason code of 32, the short explanation will probably read, “Balances on bankcard or revolving accounts too high compared to credit limits.” Or if it lists No. 38, it will probably read, “Serious delinquency and public records or collection filed.”
If you ever find yourself scratching your head about these codes, here’s a Web site that can help you in the future: ReasonCode.org. Here’s a screenshot of what ReasonCode.org will show for reason code No. 32.
Here is the explanation ReasonCode will give you about No. 32:
“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. You have bankcards or revolving accounts in your credit file with balances that are high compared to the credit limit on the account, which is a proven indicator of increased risk.”
Here’s ReasonCode’s tip on what to do to increase your score:
“Pay down balances on your accounts and keep them below 30% of the total credit limit on that account. Over time, this will have a positive impact on your score.”
If you have any questions about “reason codes” or what you can do now to better your credit profile for a future home purchase, please feel free to call us if you’d like our help. We can also advise you what to do to increase your credit scores.