If you really want to improve your credit score, you need to thoroughly examine your credit bureau reports. You could be paying your bills on time, promptly disbursing your credit card dues and in general exhibiting responsible consumer credit behavior. Still, your scores remain at around 650, that is medium risk level and refuse to budge. If you can not figure out why, open your credit report and take a look at those reason codes.
FICO reason codes are two digit codes used by the 3 major credit reporting agencies to indicate the reason why your score is as low as it is. You get a maximum of 4 codes along with your credit report scores from each of 3 credit bureaus. So, in all you should get about 12 reason codes.
In the past, these reasons were not always disclosed to consumers. As a consequence, borrowers were not aware of why they were being denied credit and why their scores were low. Rather it was a well-kept secret. The recognition of the equal right to receive credit prompted the credit reporting agencies, lenders and mortgagers to reveal reasons for refusal of credit and ranking of scores through FICO codes.
The FICO codes give you an idea of why your score is not higher and how to improve it. These codes are accompanied by a succinct explanation. Here are some examples:
09 Too many accounts recently opened
18 Number of accounts with delinquency
21 Amount past due on accounts
22 Time since derogatory public record or collection too short
26 Number of revolving accounts
The order in which these reason codes appear on your credit report is also significant. Usually the one that has affected your credit report score the most impressions first followed by the others. These FICO reason codes are based on the aspects that affect credit scores like total amount of debt, available balances, history of past payments, credit history tenure and kind of credit availed.
So, if you've been refused credit you do not have to wonder why or make do with vague explanations from lenders. All you have to do is refer to the FICO reason codes. A credit score above 750 is considered really nice and you get many perks in the form of attractive interest rates, hassle free debt application procedures etc. If you're stuck in the medium risk category and really want to enhance your scores, the FICO reason codes can be valuable to give you insight on why you're stuck in a rut.