What is a credit rating?

//What is a credit rating?
What is a credit rating?2018-08-18T14:06:34+00:00

What Is A Credit Rating?

A credit rating helps lenders estimate the ability of a person to fulfill financial obligations and is most often used to determine whether or not a person will be lent money, and if so, how much.

Credit Score

Your credit score is how your credit rating is determined. It compares you with other consumers and estimates what type of risk you will pose when lent money. It is an indicator of your financial health and is based on your history of money borrowing. A credit score is measured from 300 to 900 in Canada and is done by a credit reporting agency, like Equifax or TransUnion. The higher your score is, the better candidate you are for borrowing money because you are a lower risk to the lender. Although your credit score is taken into consideration, lenders often take other factors into account when loaning you money. Your credit score can also be used to determine how much interest you will pay on borrowed money.

Breaking Down Your Credit Score

300-575 is considered ‘Poor’

576-629 is considered ‘Fair’

630-679 is ‘Good’

680-750 would give you an ‘Excellent’ rating

750-900 is the top rating you can get

North American Standard Account Ratings

Each piece of information about your credit history is assigned a rating by the lender. The most common credit score ratings are “O, I & R”. “O” indicates that the item being described involves open credit. “I” indicates that the item being described involves installment credit, which means that it’s the type of loan you pay in regular installments until the balance is completely paid off. “R” indicates that the item described involves revolving credit which would usually take the form of something like a credit card.

If you are the type of consumer that always pays their bills on time, a “1” will be added to the above mentioned types of credit. If an amount was written off because you did not pay it back, it is given a “9” code. These ratings make up a coding system that describes whether you are “on time”, “one month late” and “two months late” by using a two-digit code.

Most creditors use a numerical system that is called a FICO or Beacon score. These types of scores aren’t usually included in the free credit reports that you can order.

What Your Credit Rating Means

R0 Too new to rate; approved but not used
R1 Pays (or paid) within 30 days of billing or pays as agreed
R2 Pays in more than 30 days but less than 60 days, or not more than two payments past due
R3 Pays in more than 60 days from payment due date, but less than 90 days, or not more than three payments past due
R4 Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due
R5 Account is at least 120 days overdue, but is not yet rated “9”
R7 Making regular payments through a special arrangement to settle your debts re: O.P.D. or Proposal
R8 Repossession (voluntary or involuntary return of merchandise)
R9 Bad debt; placed for collection; moved without giving a new address; bankruptcy

 

Bankruptcy trustees are unable to provide you with your Credit Bureau information because we do not have access to it. Your creditors and the Office of the Superintendent of Bankruptcy (OSB) report to the credit bureaus. However, we’d be happy to provide you with free debt and credit counselling services.

Call us for a free, no obligation consultation at 1-800-665-9965 or Ask Us a Question online right now.