Managing Your Credit (part 6 of 8)
Cracking the code
If you are denied credit, you will receive four reason codes which indicate why you were denied. These codes appear in order of importance, below. The first code has the strongest impact, followed in declining impact by the second, third and forth reason.
A typical readout your lender might view follows. This particular readout presents information from all three credit agencies. In the example below, the individual failed to qualify for each credit agency and the reasons are listed in descending order.
*****BORROWER: SMITH, JOE M.*****
TU Score: [00623]
- Reason1=[022]
- Reason2=[016]
- Reason3=[028]
- Reason4=[004]
Experian Score: [00629]
- Reason1=[022]
- Reason2=[016]
- Reason3=[028]
- Reason4=[004]
EQUIFAX: [00617]
- Reason1=[022]
- Reason2=[016]
- Reason3=[028]
- Reason4=[004]
All three credit agencies do not always have the exact same information therefore your three scores will differ slightly. As a general rule though, if you fail to qualify at one agency you are likely to still be denied if one of the other bureaus is checked. Most mortgage loans companies will run all three credit agencies and take the lowest score.
| Reason | Experian | TU | Equifax |
|---|---|---|---|
| Amount owed on accounts is too high | 1 | 1 | 1 |
| Delinquency on Accounts | 2 | 2 | 2 |
| Too few bank revolving accounts | 3 | N/A | 3 |
| Too many bank or nat'l revolving accounts | 4 | N/A | 4 |
| Too many accounts with balances | 5 | 5 | 5 |
| Consumer finance accounts | 6 | 6 | 6 |
| Account payment history too new to rate | 7 | 7 | 7 |
| Too many recent inquiries last 12 months | 8 | 8 | 8 |
| Too many accounts opened in last 12 months | 9 | 9 | 9 |
| Proportion of balances to credit limit too high |
10 | 10 | 10 |
| Amount owed on revolving accounts is too high | 11 | 11 | 11 |
| Length of revolving credit history is too short | 12 | 12 | 12 |
| Time since delinquent is too recent or unknown | 13 | 13 | 13 |
| Length of credit history is too short | 14 | 14 | 14 |
| Lack of recent bank revolving information | 15 | 15 | 15 |
| Lack of recent revolving account information | 16 | 16 | 16 |
| No recent non-mortgage balance information | 17 | 17 | 17 |
| Number of accounts with delinquency | 18 | 18 | 18 |
| Too few accounts currently paid as agreed | 19 | 27 | 19 |
| Time since derogatory public record or collection | 20 | 20 | 20 |
| Amount past due on accounts | 21 | 21 | 21 |
| Serious delinquent, derogatory, public record or collection | 22 | 22 | 22 |
| Too many bank or nat'l revolving accts w/ balances | N/A | N/A | 23 |
| No recent revolving balances | 24 | 24 | 24 |
| Proportion of loan balance to loan amt. too high | 33 | 3 | 33 |
| Lack of recent installment loan information | 32 | 4 | 32 |
| Date of last inquiry too recent | N/A | 19 | N/A |
| Time since last account opening too short | 30 | 30 | 30 |
| Number of revolving accounts | 26 | N/A | 26 |
| Number of bank revolving or revolving accounts | N/A | 26 | N/A |
| Number of established accounts | 28 | 28 | 28 |
| No recent bankcard balances | N/A | 29 | N/A |
| Too few accounts with recent payment information | 31 | N/A | 31 |
Note that these codes change often, and may not represent the current codes as of this writing.
Look forward next week to part 7 of 8 on our Managing Your Credit series.