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When we pull your credit report, lenders are supposed to give consumers a credit score disclosure. This document shows what your credit scores are, and gives reason codes as to why.

You’ll see references to credit score ranges of 309 to 844, higher being better. In real life, most consumers shopping for a home loan will score somewhere higher than 500. Since beginning my practice in 1990 I have only seen one credit score in the 400s, and a few as high as 824.

Remember this snapshot will differ depending on what industry is pulling your score. Consumer credit score models tend to return a higher range of numbers than do mortgage. It’s all about how each credit bureau calculates your score, and they have differing products for consumer, mortgage, employment, insurance, and beyond.

Here’s how we use reason codes: They tell us why your score isn’t higher.

When you have a low score, this information is invaluable, because it tells us what to address first in improving your score. We’ll know whether your score is damaged because of recent derogatory reporting, which is usually only corrected by waiting for the late reports to fade into the past. If the reason code tells us you have a high “proportion of balances”, we might be able to raise the score if you pay off or pay down credit cards.

But what if you already have a “good” score? For mortgage purposes today, that usually means 740 or higher. When we get reason codes for higher scores, we’re still being told why the score isn’t higher. When you consider that your score is pretty close to perfect, you’ll realize these comments hold very little weight.

For example, a recent client has a 759 credit score with the first reason code being “serious delinquency”. A review of his report shows a single credit card late payment in 2010. The event is way in the past and there is nothing to be done about changing facts, and he is already getting the best possible loan pricing. In this situation, the best thing to do is smile and say thank you and leave the credit report alone.

Don’t fall for the worst mistake you can make when your score counts: Closing unused credit lines. This can backfire and lower your score.

As with everything else mortgage-related these days, work with your local mortgage advisor and get professional guidance when obtaining a home loan. Trying to figure it out yourself could cost you for the next 30 years.

Tammy Engel is your local Mortgage Advisor, and has been working for your best interest since 1990. Contact her at 661/822-REAL for purchase, refinance, and reverse mortgage.