Gather Little by Little

Your credit rating is a very precious thing as is trust; it is hard to earn and easy to lose. So, if you are lucky enough to enjoy an R1 credit rating, you want to make sure to keep it. There are a few tricks to help you keep a stellar credit score. But before we start, here’s a quick definition of the different credit ratings (going from R1 to R9):

Credit Rating:

R1: This is revolving credit that has always been paid on time.

R2: A revolving credit account with a late payment of 30 days.

R3: A revolving credit account with a late payment of 60 days.

R4: A revolving credit account with a late payment of 90 days. You may also find credit accounts gone to collection agencies showing R4 rating. At that stage, chances are that the company sold your account to a collection agency for less than its actual value (what you owe).

R5, R6, R7, R8: It is an aggravation of an R4 rating. We rarely see them on the credit report. It usually jumps from R4 to R9.

R9: This is the worst credit rating an individual can have. This means that the account has been written off or closed by the grantor. However, the outstanding amount is still shown on the credit bureau.

Revolving credit includes credit cards and line of credits (it means that you can borrow on them without a new application). You may see the same rating but with a “I” in front instead of a “R”. This is for “instalment” and it is used for loans, leases or mortgages.

When you pull out your credit bureau, an R1 credit rating means that your “worst” credit mark is R1. This also means that if you have a single late payment of 30 days (i.e. R2), your credit rating at the top will be shown as R2. Unfortunately, it takes about 7 years to make an R2 disappear. As I told you, a credit rating is like trust ;-).

How to keep an R1 credit rating

The very best trick I can give you is to set minimum payment transfers on all your debts from your bank account. This method is “stupid proof” as you can’t forget a credit card bill thinking you already paid it. While this won’t be much of a help to pay down your debt, setting automatic payments will at least preserve your R1 rating.

You can’t make a payment? Call!

If you can’t make a payment on a credit card, you don’t have many options to preserve your credit score. You can always try to transfer your card to a zero APR balance transfer credit card but this will only solve the problem temporarily. Your best bet is to call your credit card company and try to find a solution. If you call them up front instead of waiting until they come after you, they may show some compassion and try to find a payment solution. At least, you will keep your R1 for a few more weeks.

Writing NSF checks doesn’t affect your credit score

You will have fees and you may see access to your bank account reduced, but NSF checks are not reported on your credit bureau and as such, don’t affect your credit score.

Make sure your mail follows when you move

Another classic reason for a 30 day late payment is when an individual moves and forgets to advise his credit card company. There are services available that ensure your mail follows you to the new address for a small fee. This is a few bucks well invested!

Have a budget and track down your debt

By following a budget, you will know when your bills should hit your bank account. Therefore, it is easier to flag the missing payment only a few days after it’s due. If you are late less than 30 days, chances are that it will not be reported and you will keep your R1 credit rating. You can also use Google Calendar to set email alerts on the days your bills are due. This is probably a good alternative if you don’t have the assiduity to follow your budget.

As you can see, keeping an R1 credit rating is not that easy, you only need to forget once and your whole credit “reputation” will be tarnished. There are actually several advantages of maintaining a clean credit rating. But this will be for another post ;-)

Author: Mike.

Image source: ampamuka