Understanding Credit Score Codes

When you order a copy of your credit report you get several pages of information which can be confusing. Your credit report can at times seem like a maze. You may see abbreviations and codes that you don't understand. You may be provided explanations of why you have good or bad credit but still may not understand what it means.

One of the major factors in understanding your credit report and your credit score are the reason codes listed on your credit report. Some reason codes that may appear on your credit report are:

1. Length of credit history – this means how long you have had credit, either a loan or credit card.

2. Too many inquiries – this means you have had more than 1 or 2 companies pull your credit report within the last 12-24 months which lowers your credit score. You should have no more than 1 inquiry every 12 months if needed.

3. Too many new accounts – this means that you are considered a risk because you opened more than 1-2 new account within the last 12-24 months which also lowers your credit score. You should have no more than one new account opened every 12 months if needed.

4. Account balances too high – this means that your credit cards are maxed out or the balance on your credit cards are above 30% of the credit card limit.

5. Number of revolving and installment accounts – you need to have a mix of revolving (credit cards, line of credit) and installment accounts (student loan, car loan, mortgage, etc.).

6. Recent delinquency – you had one or more accounts that were paid late in the past 0-3 years.

Your credit score consists of the following factors: your payment history which accounts for 35% of your credit score, the amounts owed which accounts for 30% of your credit score, the length of your credit history which accounts for 15% of your credit score, new credit which accounts for 10% of your credit score, and the types of credit used which accounts for 10% of your credit score.

If you disagree with any of the information or explanations on your credit report or credit score contact the credit bureau reporting it to dispute the information and ask for a listing of the accounts that caused your credit score to be low. To order your credit report visit annualcreditreport.com.