Fixing Your R Score
Dealing with debt can feel overwhelming but it becomes more manageable when you understand how the system works.
By learning more about your finances, you’ll find it easier to address any outstanding debt issues and improve your financial standing.
Every adult in Canada has an R Score and it has a major impact on your future financial transactions.
Due to this, it’s essential to know exactly what an R score is, what it means for your finances and what you can do to enhance it.
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What is an R Score?
Credit reference agencies use R Scores to rate your credit history.
A simple numbering system, going from 1-9, is used to show whether you pay your bills on time, you’ve missed payments, or you have bad debt.
In addition to this, letters are used to indicate what type of debt you have.
R stands for revolving credit, which means you make payments in varying amounts depending on what’s owed and can then borrow more.
I refers to credit that’s repaid in instalments, such as a personal loan, and O indicates open credit, including a line of credit.
Revolving credit is the most common form of unsecured debt, so most people will see the letter R followed by a number when they look at their credit rating.
Typical ratings are as follows:
R0 – Credit has been approved by lack of credit history prevents any ratings being made
R1 – Borrower pays bills within 30 days
R2 – Borrower pays within 30-60 days (one or more payments may be overdue)
R3 – Borrower pays within 60-90 days (two or more payments may be overdue)
R4 – Borrower pays within 90-120 days (three or more payments may be overdue)
R5 – Borrower’s account is usually more than 120 days overdue
R6 – This code isn’t used within the R Score system
R7 – Payments are being made under a repayment plan, consolidation order or similar arrangement
R8 – Borrower is facing repossession due to missed payments
R9 – Collections are being made due to bad debt
As you can see, R1 is the best R Score to have.
A rating of R1 shows that you pay your bills on time and manage your finances effectively.
As you begin to slide down the scale, ratings of R2-R9 indicate various forms of financial mismanagement or outstanding debt.
Future lenders will look at your Overall R Score when deciding whether or not to offer you credit, so it’s important to maintain a high R Score.
However, millions of people experience financial difficulties, so it’s not uncommon to have an R Score that’s less than perfect.
Fortunately, there are a variety of ways you can overhaul your finances and improve your R Score.
The score is calculated by examining many different factors such as credit length, payment history, and credit utilization.
How to Fix your R Score
Everyone’s financial situation is different, so it can be helpful to access bespoke debt advice when you’re trying to improve your credit rating.
With tailormade solutions, you can make long-term changes to your finances and look forward to a bright financial future.
In the meantime, however, why not try these top three tips for improving your R Score?
1. Stay up to date with your credit history
Your credit rating and history isn’t a secret, so be sure to familiarise yourself with it.
Credit reference agencies must allow you to view your credit file, so take the time to sign up online or order a paper copy.
Remember – your credit history is continually being updated, so check in regularly to ensure all entries are accurate.
2. Have inaccurate records removed
It’s not out of the ordinary for incorrect entries to be added to your credit history, which could have a negative impact on your R Score.
If you notice something’s not quite right, contact the credit reference agency and ask to have it removed.
Although they will need to investigate before making any changes, this could have a significant impact on your future borrowing.
3. Change your payment strategy
If you routinely miss payments, your R Score is going to plummet.
Modifying your spending habits or setting up direct debits can help to reduce debt and transform your financial standing.
With expert help, you’ll find it much easier to implement realistic changes to your budget.
Getting Help with Outstanding Debt
If you want to improve your R Score, talk to a debt advisor or trustee in confidence today.
There are a range of options available, no matter what your current situation is or what your R Score is.
With the right advice, you can start improving your credit rating today.
Contact Bankruptcy Canada on (877) 879-4770 to find out more.
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