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Credit Report Codes – Why You Need To Understand Them

Even some of the best credit repair specialists don’t understand how to use Credit Report Codes

Credit Report Codes (aka “reason codes” or “key factors”) are provided by the credit bureaus with every credit report that includes a score, However many people either don’t know that they are there or don’t understand how to use them.

Credit Report Codes Provide a Road Map To Improved Credit Scores

The Fair Credit Reporting Act requires that if you are provided a credit score the credit bureaus must provide you with 4 Credit Report Codes “Key Factors” indicating why your score is not higher in order of relevance. This means if you can read and understand these credit report scores you will know exactly what is needed to improve your credit score.

Below is an excerpt from the Fair Credit Reporting Act highlighting the use and requirement of credit report codes “key factors”

The Fair Credit Reporting Act Requires Credit Report Codes

(f) Disclosure of Credit Scores

(1) In general. Upon the request of a consumer for a credit score, a consumer reporting
agency shall supply to the consumer a statement indicating that the information and
credit scoring model may be different than the credit score that may be used by the
lender, and a notice which shall include –
(A) the current credit score of the consumer or the most recent credit score of the
consumer that was previously calculated by the credit reporting agency for a
purpose related to the extension of credit;
(B) the range of possible credit scores under the model used;
(C) all of the key factors that adversely affected the credit score of the consumer
in the model used, the total number of which shall not exceed 4, subject to
paragraph (9);
(D) the date on which the credit score was created; and
(E) the name of the person or entity that provided the credit score or credit file
upon which the credit score was created.
40
(2) Definitions. For purposes of this subsection, the following definitions shall apply:
(A) The term “credit score” –
(i) means a numerical value or a categorization derived from a statistical tool
or modeling system used by a person who makes or arranges a loan to
predict the likelihood of certain credit behaviors, including default (and
the numerical value or the categorization derived from such analysis may
also be referred to as a “risk predictor” or “risk score”); and
(ii) does not include –
(I) any mortgage score or rating of an automated underwriting system that
considers one or more factors in addition to credit information, including
the loan to value ratio, the amount of down payment, or the
financial assets of a consumer; or
(II) any other elements of the underwriting process or underwriting decision.
(B) The term “key factors” means all relevant elements or reasons adversely
affecting the credit score for the particular individual, listed in the order of
their importance based on their effect on the credit score.

The review and analysis of Credit Report Codes is a integral part of our pay after deletion service

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