"Every time a lender pulls your credit, the report includes a list of 'reason codes' - short explanations of what factors are holding your score back. These codes are required by law, so the bureaus generate them automatically. The problem is they are ranked by relative impact, not absolute impact."
"For someone with a score in the upper 700s, the gap between their score and a perfect 850 might be 70 to 80 points. The factors listed on their report represent the marginal reasons for that gap."
"Having four revolving cards instead of two might cost a borrower in that range a handful of points - the kind of difference that has no bearing on whether they get approved for a mortgage or what rate they receive."
Credit reports include reason codes that explain factors affecting scores, but these codes can mislead borrowers with high scores. For those in the upper 700s, minor factors like having multiple revolving credit cards have negligible effects on their overall score. A borrower with excellent utilization and a solid score should not be concerned about these notations, as they do not significantly impact mortgage approval or interest rates. Understanding this can prevent unnecessary anxiety and costly mistakes in credit management.
Read at 24/7 Wall St.
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