Credit agencies use a rating system known as an “R Score” to help classify and rate your credit history. R Ratings are one of the most common rating systems in North America and indicate to a lender or creditor how likely you are to pay back a loan.
The ratings range from 0 to 9, and the credit bureaus use this 9 point system to classify your credit rating. Your credit history, including your R Rating, will determine your ability to qualify for a mortgage, finance a car, and invest in other purchases that typically require a loan and repayment schedule.
Work with a bankruptcy trustee in Ontario at David Sklar & Associates to learn more about R Scores, your R Rating, and how you can improve your score over time after a debt relief program like a consumer proposal or bankruptcy.
Understanding the R Score Rating System
What Does R Rating Mean?
R Ratings use a coding system to indicate how likely you are to pay back a loan and how long it would take you to pay back a loan based on your financial history.
For example, a 1 Rating indicates that a person will pay their bills within 30 days of the due date. A 9 Rating, on the other hand, will suggest that you never pay your bills or have made a type of consumer debt proposal to a lender.
A credit rating helps us purchase a home, an automobile, or some other item that we would typically not be able to buy all at once. The later you are on paying your bills due, the worst your R rating can be.
Rating Numbers
Different letters can appear before your rating number, which indicate various things:
- “R” stands for “revolving” credit. You make regular payments in fluctuating amounts dependent on the account’s balance and can then borrow more money up to your credit limit.
- “O” stands for “open credit,” such as a “line of credit.” Money is borrowed as needed, and the balance is due at the end of each loan period.
- “I” stands for the credit given on an instalment basis (i.e., car loan). Money is borrowed once and repaid in regular fixed amounts until paid off.
R Rating Meaning: R Score Levels
Anyone with newly established credit will start with an R0 rating. These are the different levels of R scoring:
| R0 | Credit has been approved, but still too new for any credit ratings yet |
| R1 | Pays within 30 days of billing |
| R2 | Pays within 30-60 days of billing (one or more payments could be past due) |
| R3 | Pays within 60-90 days of billing (two or more payments past due) |
| R4 | Pays within 90-120 days of billing (three or more payments past due on account) |
| R5 | The account is typically over 120 days past due |
| R6 | The code does not exist |
| R7 | Payments are being made under a consolidation order or some type of similar agreement |
| R8 | Repossession |
| R9 | Collections (bad debt) |
What is an R1 Credit Rating?
What does an R1 mean on a credit report? An R1 credit rating is the best rating you can have as it indicates to creditors that you will pay back funds in the shortest amount of time, typically within a month. This score signifies your reliability but takes time to establish.
What is a Good R Score?
You may be wondering what’s a good R Score in the eyes of a creditor. The two ratings considered “good” are R0 and R1, as these indicate that it is either too early to judge your ability to pay back funds or that you can pay funds back within a month.
Creditors will consider any other credit rating negative as they indicate to creditors that, to some extent, you are likely to pay back funds later than preferred. The good news is that you can work to build your credit score and obtain a better rating.
How to Calculate Your R Score
The two premium credit bureaus calculate your credit score in Ontario: Equifax and TransUnion. The factors used to calculate your score are:
| 35% | Your payment history |
| 30% | Your current credit card debt & other loan debts owed |
| 15% | Length of your credit history |
| 10% | Your current types of credit |
| 10% | New credit & recent activity |
Additional factors include:
- Public Records
- Inquiries into your credit file
When You Have An R9 Rating
If you have an R9 credit rating, it usually means you are dealing with serious debt and looking for a way to get back on track. An R9 rating appears when an account has gone into collections or has been included in an insolvency process such as a bankruptcy or consumer proposal.
An R9 rating can happen to anyone, regardless of income. It’s less about how much money you make and more about how manageable your monthly expenses are, whether bills are paid on time, and how easily debt has piled up over time.
Where Can I Find My Credit Rating?
Your credit rating, including an R9, appears on your credit report, which is maintained by Canada’s two main credit bureaus, Equifax and TransUnion.
You can access your credit report in a couple of ways. Both credit bureaus allow you to request a free copy of your credit report, which will show your credit history and any R9 listings. There are also paid online services that provide faster access along with ongoing credit monitoring.
Reviewing your credit report is an important first step in understanding how your debt situation has affected your credit and what options may be available to move forward.
Debt Relief Programs & Your Credit Rating
There are various debt relief programs you can choose from to absolve yourself of overwhelming debt. Different programs come with different implications on your credit report.
Consumer Proposal: A consumer proposal will result in an R7 rating on your credit report. The good news is that this is not an R9, and the consumer proposal will be removed from your credit report three years after its completion. This will leave you with a blank slate to rebuild your credit.
Bankruptcy: Filing for bankruptcy will result in an R9 score in your credit report. How long this will stay on your report will depend on how many bankruptcies you have filed.
How to Improve Your R Score
If you are unsure how to get a good R Score, the first step is learning how to manage and budget your finances. There are many ways that you can improve your spending to raise your credit rating to where you want it to be:
Learn how to balance the budget:
If you have an R9 rating, there is still hope. One of the first steps is to learn how to budget appropriately. Go over your past six months of spending. See what you have been spending on and how much you are making each month. Accurately tracking each area of spending will help you spot the areas that you will need to address.
David Sklar & Associates offers credit counselling services to provide individuals with the tools and resources they need to manage their debts and finances.
Repair your Credit History:
Understand your credit history and learn what you can do to fix it. Apply for a credit bureau report for each spouse. Keeping regular checks on your credit history will also help protect you against identity theft. To fix your credit, you need to use your credit. Re-establish a good pattern. Never carry a balance. Always pay within 30 days. Work to get your R1 rating back.
Plan for your Future:
Educate your family about money and teach them to save/manage. You can learn to be in control of your finances and pass on these lessons. Make learning about money fun by creating a mad money jar for your kids. They will learn that money is not endless and that they will need to keep spending within a specific budget. The lesson for all is understanding how money works.
Credit Counselling with David Sklar & Associates
Make your dream a reality by cutting your variable expenses and keeping and paying your fixed fees. Take care of your past mistakes and put your family on a promising financial future. At David Sklar & Associates, we are committed to protecting your credit rating and helping you rebuild it to obtain financial independence.
