Credit Reporting Code

Credit reporting codes are used by all three major credit reporting agencies. These codes help determine your credit score. Each credit reporting agency will have different codes and they all impact your credit scores that lenders use for credit granting criteria. Lenders use credit scores to determine the likelihood that you will default on a loan. The codes are issued in a sequence or range of numbers.

Credit Score Calculation

Your credit score is determined by five categories which include, your pay history (35 percent), amount of debt (30 percent), types of accounts (15 percent), length of credit history (15 percent) and new credit accounts opened (5 percent).The listed categories also contribute to your credit score at different levels or percentages. Therefore your pay history has the largest impact on your credit score because it contributes 35 percent to the score. All of the credit reporting codes will impact one of the five categories.

Experian Code

When you look at the codes for Experian they run from 00001 to 00039. The first code is 00001, which stands for "amounts owed on accounts is too high." If you have this code or designation on your credit report, it will lower your credit score, aka FICO score. Whenever you use too much of your available credit it reduces your credit score. If you have a credit card and the credit limit is $5,000 with no balance then your available credit is 100 percent. However if you make purchases of $2,500 your credit usage is now 50 percent. Once your overall credit usage gets to 33 percent it begins to lower your credit score.

Interpretation

Whenever a lender gets a copy of your credit file these codes will show up and it helps the lender make sense of the information on your report. All they have to do is take a look at each code to see how many of your accounts is impacted by a certain code. Equifax has of code of 00039, which stands for serious delinquency and if too many accounts have this designation your credit score can be severely damaged.

Code Numbers

Equifax has approximately 24 codes that affect your credit report. The codes are divided up so that four or five directly apply to one of the five categories above. The same holds true for Experian, which has 22 codes and Transunion, which has 25 codes. Each credit reporting agency has its own code designations, and some are similar among the agencies and some are not.

Algorithm

Credit scores range from 300 to 850. It is hard to determine exactly how much each code will affect someone's credit score. All computations are based on an algorithm or statistical analysis.