Archive for November, 2008

What is the Meaning of an R9 Credit Rating?

Thursday, November 20th, 2008

When you view your credit report, you will notice status indicators next to each account listed. With revolving credit accounts, they range from "R0" to "R9". The "R" stands for a "revolving" (charge) account. If the account is an individual account, it will show "I", and mortgage accounts will show an "M".

"R9" means that particular account has passed 120 days late, is very delinquent, and has been written off as a bad debt by that company. The bad debt is either charged off or sent on to collections. This does not mean, however, that you do not have to pay this account, or that the company cannot continue to try to collect the balance due.

R9 credit rating remains on your credit report until it drops off after seven years. Until that happens, you will be unlikely to qualify for any new loans or credit accounts. The "R" scale is progressive, from R0 for new accounts, and R1 for current accounts, and up for each period of lateness, or an R7 payment plan, R8 repossession, or R9 charge off/collection. Where you want to be on every account is in the R1 category.

By showing the "R" scale, potential lenders communicate to each other valuable information about your payment history activity, from which they can determine credit worthiness and risk in repayment of any new loan or credit account. You can pay off an R9 account, and request in writing via certified letter to have the company or collection agency notify your credit reporting agency (one of the "big 3" agencies (Experian, Equifax, Trans Union) to remove the R9 rating.

Giving you an R9 credit rating is mean, but it is required of credit card lenders by federal law to avoid inflating company future earnings projections. You earned it by being a poor credit risk and not paying your balance due. It is unlikely that you can get the R9 removed from your account, even after paying off the balance due. Your report may show “account paid” or a zero balance due, but the R9 classification will remain. Therefore it is in your interest to be informed about the “R” system, and avoid being so late that you are marked with an irretrievable R9.

It is valuable to check your credit reports from time to time. You are entitled to a free report from each of the Big 3 (Experian, Equifax, Trans Union) once a year from www.annualcreditreport.com. If you get one report from one agency every four months throughout the year, you can keep a good handle on your report and its accuracy. If you see anything except an "R1" rating, get right on that problem before it progresses further.

Like anything else on the market, credit accounts are a “buyer beware” situation. Use it carefully and benefit from your good credit score, or abuse the system and suffer the negative results. An R9 credit rating will disappear over time, but in the interim, credit privileges may be harmed.