Understanding A Credit Denial Notice

As the new year rings in, many of us will be applying for a loan for one reason or another. Unfortunately, a percentage of those applying for a loan will be denied. After that denial, federal law requires that you be sent a letter explaining the reasons for that denial. Despite that requirement, there is no requirement that the letter be sent in plain English, so the notice can be confusing and hard to understand.

The Letter

The letter that you will receive explaining why your were denied will include ”key factors or reason codes that adversely affected the credit score, with a requirement to disclose five ‘reason codes’ any time inquiries are a ‘key factor’ that adversely affected the score”, according to FICO. That is nice and all, but there are 40 reason codes and they are not fully explained in the letter.

The Codes

As stated above there are 40 different codes and your letter will include the codes given by all three major reporting agencies. The Equifax code will be listed first, then TransUnion, followed by Experian. In the event that an agency does not use a particular code and N/A will appear. So, without further ado, here are the codes.

• Amount owed on accounts is too high – 1,1,1
• Level of delinquency on accounts – 2,2,2
• Too few bank revolving accounts- 3,N/A,3
• Too many bank or national revolving accounts – 4,N/A, 4
• Too many accounts with balances – 5,5,5
• Too many consumer finance company accounts – 6,6,6
• Account payment history is too new to rate- 7,7,7
• Too many recent inquiries last 12 months – 8,8,8
• Too many accounts recently opened – 9,9,9
• Proportion of balances to credit limits is too high on bank or other revolving accounts – 10,10,10
• Amount owed on revolving accounts is too high – 11,11,11
• Length of time revolving accounts have been established – 12,12,12
• Time since delinquency is too recent or unknown – 13,13,13
• Length of time accounts have been established – 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
• Date of last inquiry too recent – N/A, 19, N/A
• Too few accounts currently paid as agreed – 19,27,19
• Length of time since derogatory public record or collection is too short – 20,20,20
• Amount past due on accounts – 21,21,21
• Serious delinquency, derogatory public record or collection filed – 22,22,22
• Number of bank or national revolving accounts with balances – 23,N/A, 23
• No recent revolving balances – 24,24,24
• Number of revolving accounts – 26,N/A,26
• Number of established accounts – 28,28,28
• No recent bankcard balances – N/A,29,29
• Time since most recent account opening too short – 30,30,30
• Too few accounts with recent payment information – 31,N/A,31
• Lack of recent installment loan information – 32,4,32
• Proportion of loan balances to loan amounts is too high – 33,3,33
• Amount owed on delinquent accounts – 34,31,34
• Serious delinquency and public record or collection filed – 38,38,38
• Serious delinquency – 39,39,39
• Derogatory public record or collection filed – 40,40,40

Hopefully, you will find this information helpful. Another use for this info is as a way to prepare yourself before applying for a loan. Good luck.