CREDIT REPORTS

What is a credit report?

A credit report offers vital information about your credit history. The information in your credit report serves as a reference point for financial institutions considering your creditworthiness. You should check your personal credit report at least twice a year to make sure that the information is correct.

Your credit report will contain information on whether or not you have missed, or have been late on your payments in the past (and how late you were). It will also provide details such as your current and previous addresses, social security number, any credit card accounts and current balances you may have, as well as past credit card accounts (often referred to as “Revolving Credit”) even if those accounts have been closed or canceled.

This report also lists any auto loans and mortgages (along with balances and how diligent you are about making the payments), or any other sort of loan or credit which you were issued, providing the lender reports the info to the credit bureaus on a regular basis, most of them do. Also, the number of times you have recently applied for credit (credit inquiries) will be available to view as well, along with information on any collections, past due accounts, that sort of thing.

 

It’s also an excellent idea to check your credit report and credit score right before you make any large purchases (house, car, boat etc.). Doing this ensures that you are informed about what the lender is seeing on your credit report, and there are no surprises in store for you at the dealership, or bank, about your credit worthiness. The better you look to lenders, the better chance you will have of getting those “1.9% interest” or “0% interest” offers, which in the long run can save you a significant amount of money in interest on your purchase!

What About A Credit Rating?
In addition to using credit (FICO) scores, most countries (including the U.S. and Canada) use a scale of 0-9 to rate your personal credit. On this scale, each number is preceded by one of two letters: “I” signifies installment credit (like home or auto financing), and “R” stands for revolving credit (such as a credit card).

SEE: How Credit Cards Affect Your Credit Rating

Each creditor will issue its own rating for individuals. For example, you may have an R1 rating with Visa (the highest level of credit rating), but you might simultaneously have an R5 from MasterCard if you’ve neglected to pay your MasterCard bill for many months. Although the “R” and “I” systems are still in use, the prevailing trend is to move away from this multiple rating scale toward the single digit FICO score. Nevertheless, here is how the scale breaks down:

Credit Report Rating Codes

Installment
Account
(fixed number
of payments

Revolving or
Option Account
(Open-ended)

Open Account
(30, 60, or 90-day
account.)

Meaning

I0

R0

O0

Too new to rate

I1

R1

O1

Pays account as agreed

I2

R2

O2

Not more than two payments past due

I3

R3

O3

Not more than three payments past due

I4

R4

O4

Not more than four payments past due

I5

R5

O5

More than 120 days or four payments past due

I7

R7

O7

Making regular payments under WEP.

I8

R8

O8

Repossession

I9

R9

O9

Bad debt; placed for collection

IA

RA

OA

Account is inactive

IB

RB

OB

Lost or stolen card

IC

RC

OC

Contact member for status

ID

RD

OD

Refinanced or renewed

IE

RE

OE

Consumer deceased

IF

RF

OF

In financial counseling

IG

RG

OG

Foreclosure process started

IH

RH

OH

In WEP of other party

IJ

RJ

OJ

Adjustment pending

IM

RM

OM

Included in Chapter 13

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