You are hereCredit Payment Ratings, or "What Does R2 Mean Anyway?"
Credit Payment Ratings, or "What Does R2 Mean Anyway?"
In previous posts, we’ve talked about what a credit report is, how to get a copy of your credit report, and why you should check your report regularly. You already know that companies use your credit report to help them decide whether to loan you money or provide you with access to credit.
But have you noticed the payment history ratings that appear on your credit report? Do you know how to decode them and what they mean?
Credit Payment Ratings
In contrast to your credit score, a credit payment rating is a way to assess each payment you make to your creditors. The ratings system assigns a rating to each payment you owe throughout your history of borrowing. For instance, when you pay your credit card bill on time, you get the equivalent of a gold star placed next to that particular account for the month. These gold stars take a couple of different forms, depending on which credit bureau is generating your credit report.
Equifax Ratings
Your Equifax credit report rates each of your monthly payments using a letter and a number. These codes are easy to read once you know what they mean.
Each code contains a letter and a number. The letter refers to the type of credit you are using, and the number shows the status of your payments - whether a payment is behind and, if yes, by how many months. The best number is a '1', which shows that your payment was made on time. At the other end of the scale, a '9' communicates that an amount has been written off as bad debt, as it was never received by the lender.
The three letters used in the codes are R, O, and I. 'R' stands for revolving credit, such as credit cards; 'O' signals an open loan, such as a line of credit, and may include student loans; 'I' is used for installment loans, such as a car loan.
For instance, here’s how to interpret the 'R' ratings on your credit report:
|
R0 |
Too new to rate. This credit is approved but has not been used or no bill has been generated. |
|
R1 |
The account is paid on time, or not more than 30 days (1 month) overdue. |
|
R2 |
The account is paid more than 1 month (or one payment) overdue, but not more than 2 months (or payments) overdue. |
|
R3 |
Payment is more than 2 months (or payments) overdue, but not more than 3 months (or payments) overdue. |
|
R4 |
Payment is more than 3 months (or payments) overdue, but not more than 4 months (or payments) overdue. |
|
R5 |
The account is at least 6 months overdue, but has not yet been sent to collections. |
|
R6 |
(This rating does not exist.) |
|
R7 |
Regular payments are being made on this account through a debt repayment arrangement. |
|
R8 |
The merchandise has been voluntarily or involuntarily repossessed. |
|
R9 |
Bad debt; in collections; client moved with no forwarding address; or bankruptcy. |
TransUnion Ratings
To rate your payments, TransUnion uses a series of different colored boxes with abbreviations inside. These boxes are found next to each account on your credit report. It might be a green box with the letters 'OK' inside (meaning you paid your bill on time), or it might be an orange box with the numbers '150 (meaning that you are more than 150 days late paying that particular account).
To see all of the different TransUnion ratings and to learn more about this topic, download a free publication from the Financial Consumer Agency of Canada (or you can request that it be mailed to you at no charge) called "Understanding your Credit Report and Credit Score."
Gaining an understanding of how your credit history is rated can be the first step in taking control of your financial destiny. Use what you know to help you improve your use of credit!
